Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. to save for a new car, samuel smith will invest $8

To save for a new car, Samuel Smith will invest $8,000 at the end of each...

Free

80.2K

Verified Solution

Question

Finance

To save for a new car, Samuel Smith will invest $8,000 at theend of each year for the next 5 years. The interest rate is 8%.What is the future value?

Multiple Choice

  • $40,000

  • $7,980

  • $46,936

  • $36,048

Answer & Explanation Solved by verified expert
4.3 Ratings (757 Votes)

Calculation of Future value.

Future Value = PV * (1+i)n

Here PV is the present value of the amount invested

i is rate of interest and n is the number of periods

End of Year 1   $8,000 (1+0.08)4

=                    $8,000 * 1.360

=                    $10,884

End of Year 2   $8,000 (1+0.08)3

=                    $8,000 * 1.259

=                    $10,077

End of Year 3   $8,000 (1+0.08)2

=                    $8,000 * 1.166

=                    $9,331

End of Year 4   $8,000 (1+0.08)1

=                    $8,000 * 1.08

=                    $8,640

End of Year 5 $8,000

=                    $8,000

Total Future Value at the end of year 5 = $10,884 + $10,077 + $9,331 + $8,640 + $8,000

                                                        = $46,936 (approx).

Hence, the correct answer is $46,936
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

To save for a new car, Samuel Smith will invest $8,000 at theend of each year for the next 5 years. The interest rate is 8%.What is the future value?Multiple Choice$40,000$7,980$46,936$36,048

Other questions asked by students