Question

Suppose you were going to save $1,000 per year for three years at a 10% interest rate compounded annually, with the first investment occurring today. What would be the future value of this investment

Answer 1

$13,310

Step-by-step explanation:

The investment would be 100% = $1000 * 100% / 10% = $10,000

So this is the amount that would be deposited today to earn $1000 each year which is 10% of the amount deposited today.

The Future Value is given as under:

Future Value = Present Value * (1 + r)^n

Here,

Present value is $10,000

r is 10%

and n is 3 years

So, by putting values we have:

Future Value = $10,000 * (1 + 10%)^3 = $13,310