Question

A sum of $500,000 will be invested by a firm two years from now. If money is worth 12%, what will be the worth of this investment 10 years from now?

Answer 1

Answer:

investment 10 years from now is $1,238,000 .

Explanation:

given data

sum = $500,000

rate = 12% =0.12

total time = 10 year

solution

as present value After 2 years from now is $500,000

so time period is now = 8 year  ( 10 - 2 )

so we apply future value formula that is

Future value  = present value × $(1+r)^{t}$   ............1

put here value we get

Future value  = $500,000 × $(1+0.12)^{8}$  

Future value  = $500,000 × 2.476

Future value  = $1,238,000  

so investment 10 years from now is $1,238,000 .