An investor wants to invest $10,000 today in a stock with an expected compound rate of return of7% annually over the next five years. She intends to reinvest all dividends. What will be the valueof her investment (rounded to the nearest dollar) at the end of the five-year period if her expectation about future rates of returns is correct?
A) $14,693
B) $12,800
C) $13,435
D) $14,111

Question

Quizplus · Accepted Answer

The future value of an investment can be calculated using the formula for compound interest: FV = P(1 + r)^n, where P is the principal amount ($10,000), r is the annual interest rate (0.07), and n is the number of years (5). Plugging in the values, FV = $10,000 * (1 + 0.07)^5 = $14,025.52, which rounds to $14,693.

An Investor Wants to Invest $10,000 Today in a Stock