Question

Stu deposited $400 in an account three years ago. Last year, he deposited $250 and plans to deposit $300 next year. The rate is 3 percent. Which one of these correctly states a portion of the formula needed to compute the future value five years from today

Answer 1

Answer and Explanation:

Future value = Present value x (1+i)^n, where

n = number of years

I = interest rate

From the question n = 8 years for the amount $400 ,

n= 7years for $250 ,

n=4years for $300

interest = 3%= 0.03

Future value of $400 = 400 (1 + 0.03)^8 = $506.71

Future value of $ 250 = 250 (1+0.03)^7 = $307.47

Future value of $ 300 =300(1+0.03)^4 = $337.65