You just purchased a parcel of land for $10,000. If you expect a 12% annual rate of return on your investment, how much will you sell the land for in 10 years?
A) $25,000
B) $31,060
C) $38,720
D) $34,310

Question

Quizplus · Accepted Answer

Using the compound interest formula, we can find the future value of the land:
FV = PV x (1 + r)^n
where PV is the present value (initial cost) of the land, r is the annual rate of return, and n is the number of years. Plugging in the given values:
FV = $10,000 x (1 + 0.12)^10
FV = $31,060.28
Therefore, you should sell the land for $31,060.28 in 10 years to get a 12% annual rate of return on your investment. Choice B is the closest to this value.

You Just Purchased a Parcel of Land for $10,000