You invest $3,600 today at a nominal annual rate of 5.5%. This investment will pay one payment five years from now. What will be the amount of that payment?

Question

Quizplus · Accepted Answer

The future value of a single sum can be calculated using the formula FV = PV(1 + r)^n, where FV is the future value, PV is the present value, r is the annual interest rate, and n is the number of years. Here, PV = $3,600, r = 5.5% or 0.055, and n = 5 years. Plugging these values into the formula gives FV = $3,600(1 + 0.055)^5 = $4,705.06.

You Invest $3,600 Today at a Nominal Annual Rate of 5.5