Explore BrainMass

Future Values and Compound Interest

Can you please take me through this example process step by step?

Future Values

In 1880 five aboriginal trackers were each promised the equivalent of 100 Australian dollars for helping to capture the notorious outlaw Ned Kelley. In 1993 the granddaughters of two of the trackers claimed that this reward had not been paid. The Victorian prime minister stated that if this was true, the government would be happy to pay the $100. However, the granddaughters also claimed that they were entitled to compound interest. How much was each entitled to if the interest rate was 4 percent? What if it was 8 percent?


Solution Preview

For getting the present value if the amount is in the past, you have to use the FVIF table to get the factor using the period and the interest rate. In this case the amount started in 1880 and till 1993 it would be 113 years. We cannot get the value from the table for such a period and we can use the compound interest formula. What the compound interest ...

Solution Summary

The solution explains how to calculate the future value of a lump sum using the FVIF table and given calculations.