Future value of an investment.

1. You will receive $4,000, three years from now. The discount rate is 10 percent.

a. What is the value of your investment two years from now? Multiply $4,000 X .909 (one year's discount rate at 10 percent).

b. What is the value of your investment one year from now? Multiply your answer to part a by .909 (one year's discount rate at 10 percent).

c. What is the value of your investment today? Multiply your answer to part b by .909 (one year's discount rate at 10 percent).

Solution Summary

PDF which shows step-by-step introduction of the general future value formulae for this problem so you can see where the 0.909 value comes from and how problems like this can be solved without tables, or verified differently after consulting tables.