Asked by Isaiah Diller on Jun 02, 2024
Verified
If the interest rate is 15 percent, what is the future value of $10,000 two years from now?
A) $13,225
B) $225
C) $13,000
D) $7,576
Interest Rate
A charge, represented as a percentage of the principal, assessed by a lender for allowing a borrower to use their resources.
Future Value
The value of a current asset at a specified date in the future based on assumed growth rates or interest rates.
- Understand the concept of future value and how it is affected by interest rates.
Verified Answer
ZK
Zybrea KnightJun 05, 2024
Final Answer :
A
Explanation :
The future value of an investment is calculated using the formula FV = PV(1 + r)^n, where PV is the present value, r is the interest rate per period, and n is the number of periods. Here, PV = $10,000, r = 15% or 0.15, and n = 2 years. Plugging these values into the formula gives FV = $10,000(1 + 0.15)^2 = $10,000(1.3225) = $13,225.
Learning Objectives
- Understand the concept of future value and how it is affected by interest rates.