BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following investments has a larger future value:Investment A, a $1, 000 investment earning 5% per year for 6 years, or Investment B, a $500 investment earning 10% per year for 6 years, with a bonus of an extra $500 added at the end of the sixth year?
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Investment B, with a future value of $1, 886.
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Investment A, with a future value of $1, 386.
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Investment A, with a future value of $1, 340.
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Investment B, with a future value of $1, 386.
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Explanation:
Detailed explanation-1: -Answer and Explanation: The correct answer is d) $1, 116.14.
Detailed explanation-2: -An investment of $1, 000 made today will be worth $1, 480.24 in five years at interest rate of 8% compounded semi-annually.
Detailed explanation-3: -The future value of $500 one year from today if the interest rate is 6 percent is $530.
Detailed explanation-4: -Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value is important to investors and financial planners, as they use it to estimate how much an investment made today will be worth in the future.
There is 1 question to complete.