Future value calculation without referring to tables or to ...



Future value calculation without referring to tables or to the preprogrammed function on your financial calculator, use the basic formula for future value along with the given interest rate, i, and the number of periods, n, to calculate the future value interest factor in each of the cases shown in the following table. Compare the calculated value to the value in Appendix Table A-1 Case Interest rate, i Number of periods, n A 12% 2 B 6 3 C 9 2 D 3 4

Future value tables Use the future value interest factors in Appendix Table A–1 in each of the cases shown in the table on the facing page to estimate, to the nearest year, how long it would take an initial deposit, assuming no withdrawals, a. To double b. To quadruple. Case Interest rate A 7% B 40 C 20 D 10

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Case

A FVIF 12%,2 periods = (1 +.12)2 = 1.254

B FVIF 6%,3 periods = (1 +.06)3 = 1.191

C FVIF 9%,2 periods = (1 +.09)2 = 1.188

D FVIF 3%,4 periods = (1 + .03)4 = 1.126

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Case A

a. 2 = 1 x (1 + .07)n b. 4 = 1 x (1 + .07)n

2/1 = (1.07)n 4/1 = (1.07)n

2 = FVIF7%,n 4 = FVIF7%,n

10 years< n < 11 years 20 years < n < 21 years

Nearest to 10 years Nearest to 20 years

Case B

a. 2 = 1 x (1 + .40)n b. 4 = (1 + .40)n

2 = FVIF40%,n 4 = FVIF40%,n

2 years < n < 3 years 4 years < n < 5 years

Nearest to 2 years Nearest to 4 years

Case C

a. 2 = 1 x (1 + .20)n b. 4 = (1 + .20)n

2 = FVIF20%,n 4 = FVIF20%,n

3 years < n < 4 years 7 years < n < 8 years

Nearest to 4 years Nearest to 8 years

Case D

a. 2 = 1 x (1 +.10)n b. 4 = (1 +.10)n

2 = FVIF10%,n 4 = FVIF40%,n

7 years < n < 8 years 14 years < n ................
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