Asked by Sakina Pervez on May 02, 2024
Verified
If the interest rate is 5 percent, what is the future value of $5,000 three years from now?
A) $5,788
B) $5,010
C) $5,500
D) $4,310
Interest Rate
The part of a loan that attracts interest charges for the borrower, customarily expressed as a yearly percentage of the loan's unpaid balance.
Future Value
Future value is the value of a current asset at a specified date in the future based on an assumed rate of growth over time.
- Gain insight into the notion of future value and the influence exerted by interest rates.
Verified Answer
BN
Beauty NnamaniMay 03, 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 annual interest rate, and n is the number of years. Plugging in the values, we get FV = $5,000(1 + 0.05)^3 = $5,788.
Learning Objectives
- Gain insight into the notion of future value and the influence exerted by interest rates.