If Nicolai earns an 8 percent after-tax rate of return, $20,000 today would be worth how much to Nicolai in five years? Use future value of $1. (Round discount factor(s)to four decimal places.)
A)$20,000
B)$13,620
C)$18,520
D)$21,600
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

To find the future value of $20,000 in five years at an 8 percent after-tax rate of return, we use the future value formula: FV = PV * (1 + r)^n, where PV is the present value ($20,000), r is the rate of return (0.08), and n is the number of years (5). Calculating this gives FV = $20,000 * (1 + 0.08)^5 = $20,000 * 1.4693 = $29,386 (rounded to the nearest dollar, and noting the calculation error in the provided choices). Since none of the provided choices match this calculation, the correct answer is E) None of the choices are correct.

If Nicolai Earns an 8 Percent After-Tax Rate of Return