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# Future value, present value and finding the required interes

1 -Future value -
If you deposit \$ 10,000 in a bank account that pays 10 percent interest annually, how much would be in your account after 5 years?

2- Present value -
What is the present value of a security that will pay \$ 5,000 in 20 years if securities of equal risk pay 7 percent annually?

3- Finding the required interest rate-
Your parents will retire in 18 years. They currently have \$ 250,000, and they think they will need \$ 1,000,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds?

#### Solution Preview

1 -Future value -
If you deposit \$ 10,000 in a bank account that pays 10 percent interest annually, how much would be in your account after 5 years?

FV = PV (1+i)n where PV is the present value
FV is the future value
i is the interest rate
n is the period

FV = 10,000(1 ...

#### Solution Summary

This solution is comprised of a detailed explanation to calculate the future value, present value, and the required rate of return.

\$2.19