Future value: Ning Gao is planning to buy a house in five years. She is looking to invest $25,000 today in an index managed fund that will provide her a return of 12 percent annually. How much will she have at the end of five years? (Round to the nearest dollar.)
A) $45,000
B) $39,338
C) $44,059
D) $40,000

Question

Quizplus · Accepted Answer

The future value can be calculated by using the formula:
FV = PV x (1 + r)n
where PV = Present Value = $25,000, r = rate of return = 12% = 0.12, n = number of years = 5

Plugging in the values, we get:
FV = $25,000 x (1 + 0.12)5
FV = $44,058.88

Rounding to the nearest dollar, the answer is $44,059. Hence, option C is the best choice.

Future Value: Ning Gao Is Planning to Buy a House