You are considering an investment that is expected to pay 3 percent in year 1, 5 percent in years 2 and 3 and 7 percent in year 4. If you invest $1,000 today, what will this investment be worth at the end of the fourth year?
A) $1215.07
B) $1215.51
C) $1275.81
D) $1285.75

Question

Quizplus · Accepted Answer

The future value of the investment can be calculated using the formula:FV = PV * (1 + r1) * (1 + r2) * (1 + r3) * (1 + r4)where:PV is the present value of the investment ($1,000)r1 is the interest rate in year 1 (3%)r2 is the interest rate in year 2 (5%)r3 is the interest rate in year 3 (5%)r4 is the interest rate in year 4 (7%)Substituting these values into the formula, we get:FV = 1000 * (1 + 0.03) * (1 + 0.05) * (1 + 0.05) * (1 + 0.07)= 1000 * 1.03 * 1.05 * 1.05 * 1.07= 1215.07Therefore, the investment will be worth $1215.07 at the end of the fourth year.

You Are Considering an Investment That Is Expected to Pay