If Scott earns a 12% after-tax rate of return, $15,000 today would be worth how much to Scott in 2 years?

Question

Quizplus · Accepted Answer

To calculate the future value (FV) of the $15,000 investment after 2 years, we use the formula:
FV = PV*(1+r)^n, where PV is the present value, r is the after-tax rate of return, and n is the number of years.
In this case, PV = $15,000, r = 0.12 (12%), and n = 2. Since the rate of return is after-tax, we don't need to adjust for taxes. Thus,
FV = $15,000*(1+0.12)^2 = $18,816.
Therefore, the correct answer is D, $18,816.

If Scott Earns a 12% After-Tax Rate of Return, $15,000