Question

The relationship between the present value of a future sum and the future value of a present sum can be expressed in terms of their respective interest factors. If the present value of $200,000 due at the end of 8 years, at 10%, is $93,300, what is the approximate future value of $200,000 invested for the same length of time and at the same rate?
A. $93,300
B. $200,000
C. $293,300
D. $428,724

Answer 1

Answer:

D. $428,724

Explanation:

The formula for present value of a lump sum will be:

Nomial x 1/capitalization factor = Present Value

We plug our given data and solve for capitalization factor

200,000 x 1/capitalization factor =  93,300

200,000/ 93,300 = capitalization factor = 2,1436227224

Now, we are able to calculate the future value

the future value will be:

principal x capitalization factor = future value

200,000 x 2,1436227224 = 428,724.54448‬