Calculating future and present values of a lump sum amount
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Your grandfather put some money in an account for you on the day you were born. You are now 18 years old and are allowed to withdraw the money for the first time. The account currently has $3,996 in it and pays an 8% interest rate.
a.How much money would be in the account if you left the money there until your 25th birthday?
b.What if you left the money until your 65th birthday?
c.How much money did your grandfather originally put in the account?
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Solution Summary
The solution describes the steps and formulas used in calculating present and future values of a lump sum amount.
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Solution:
We know that
FV=PV*(1+r/100)^n
Where PV=Present Value of cash
FV= Future value of cash
r=interest rate
n = ...
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- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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