If $16800 is deposited in a savings account today, what amount will be available three years from today? The following future value interest factors are provided: Periods Future Value of 1 at 12% 1 2 3 4 5 1.120 1.254 1.405 1.574 1.762 ($16800 x 1.120) + ($16800 x 1.254)+($16800 x 1.405) O $16800+ 1.405 O $16800 x 1.405 O $16800 x 1.120 x 3
If $16800 is deposited in a savings account today, what amount will be available three years from today? The following future value interest factors are provided: Periods Future Value of 1 at 12% 1 2 3 4 5 1.120 1.254 1.405 1.574 1.762 ($16800 x 1.120) + ($16800 x 1.254)+($16800 x 1.405) O $16800+ 1.405 O $16800 x 1.405 O $16800 x 1.120 x 3
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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![### Future Value Calculation Example
If $16,800 is deposited in a savings account today, what amount will be available three years from today? The following future value interest factors are provided:
| Periods | Future Value of 1 at 12% |
|---------|--------------------------|
| 1 | 1.120 |
| 2 | 1.254 |
| 3 | 1.405 |
| 4 | 1.574 |
| 5 | 1.762 |
#### Possible Answers:
1. \((\$16,800 \times 1.120) + (\$16,800 \times 1.254) + (\$16,800 \times 1.405)\)
2. \(\$16,800 \times 1.405\)
3. \(\$16,800 \div 1.405\)
4. \(\$16,800 \times 1.120 \times 3\)
The correct formula to calculate the future value for 3 years at 12% interest would be to multiply the initial deposit by the future value factor for 3 years:
\[ \text{Future Value} = \$16,800 \times 1.405 \]
Therefore, the correct answer is option 2: \(\$16,800 \times 1.405\).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbf3d27b8-9870-4dd6-91a1-e79db3e1a9b0%2F75533268-03e3-42cd-994f-22642d8cf46e%2Fa2966ap_processed.png&w=3840&q=75)
Transcribed Image Text:### Future Value Calculation Example
If $16,800 is deposited in a savings account today, what amount will be available three years from today? The following future value interest factors are provided:
| Periods | Future Value of 1 at 12% |
|---------|--------------------------|
| 1 | 1.120 |
| 2 | 1.254 |
| 3 | 1.405 |
| 4 | 1.574 |
| 5 | 1.762 |
#### Possible Answers:
1. \((\$16,800 \times 1.120) + (\$16,800 \times 1.254) + (\$16,800 \times 1.405)\)
2. \(\$16,800 \times 1.405\)
3. \(\$16,800 \div 1.405\)
4. \(\$16,800 \times 1.120 \times 3\)
The correct formula to calculate the future value for 3 years at 12% interest would be to multiply the initial deposit by the future value factor for 3 years:
\[ \text{Future Value} = \$16,800 \times 1.405 \]
Therefore, the correct answer is option 2: \(\$16,800 \times 1.405\).
Expert Solution
Step 1: Introduction
Future value is an estimate of the future cash flows that may be received at a future date, discounted by an assumed discount rate. Investors evaluate their projects on the basis of their future value.
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