I was using the present value formula, for 5% interest on 4,500, is it possible that there is a compounded interest version of it? If so, I need the equation to compound it to year 2, 5, then 40. Thanks!
I was using the present value formula, for 5% interest on 4,500, is it possible that there is a compounded interest version of it? If so, I need the equation to compound it to year 2, 5, then 40. Thanks!
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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I was using the present value formula, for 5% interest on 4,500, is it possible that there is a compounded interest version of it? If so, I need the equation to compound it to year 2, 5, then 40. Thanks!
Transcribed Image Text:An example of what it would look like. The interest rate chosen is 5% at an annual compounded rate.
Years
Interest
Beginning Money
PV/total money
Year 1
5% (0.9524)
$4,500 ($4,500 ÷ 0.9524)
$4725
Year 2
$4,500 (?)
$4,961
Year 5
$4,500 (?)
$5,743
Year 40
$4,500 (?)
$31,680
Expert Solution
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Interest Rate = 5%
Requirement: Compound beginning money of 4500 to year 2, 5 and 40
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