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Your mutual fund was valued at $237,500. It has lost 6% per year for the last 3 years. What is its value today?

User Nil Pun
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1 Answer

5 votes

Answer:

$197,263.7

Step-by-step explanation:

The current value can be found by use of the compound interest formula. Since the asset has been losing value at 6 % per year,

the interest rate will be -6%

The formula for compound interest is FV = PV × (1+r)^n

in this case

FV= current value

PV= $237,500

r= -6% or -0.06%

n= 3 years

Fv= $237, 500 x ( 1 + (-0.06)^3

Fv=$237,500 x (0.94)^3

Fv= $237,500 x 0.830584

Fv= $197,263.7

The current value =$197,263.7

User Akrsmv
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