Suppose you have $10,000 to invest in a small-company stock for 10 years. The average annual rate of return is 12.5%. What is the real future value of your investment after 10 years?

Question

Quizplus · Accepted Answer

To calculate the future value of the investment, we can use the formula: FV = PV x (1 + r)^(n), where PV is the present value, r is the average annual rate of return expressed as a decimal, and n is the number of years.
In this case, PV = $10,000, r = 0.125, and n = 10. Plugging in these values, we get:
FV = $10,000 x (1 + 0.125)^10
FV = $10,000 x 3.2473
FV = $32,473
Therefore, the real future value of the investment after 10 years is $32,473, which is option A.

Suppose You Have $10,000 to Invest in a Small-Company Stock