Question

Round to the nearest cent

Future value (with changing interest rates). Jose has $7,000 to invest for a 5-year period. He is looking at four different investment choices. What will be the value of his investment at the end of 5 years for each of the following potential investments? a. Bank CD at 4.5% b. Bond fund at 8%. c. Mutual stock fund at 15%. d. New venture stock at 22%. a. What will be the value of Jose's bank CD investment that offers an annual rate of return of 4.5% for 5 years? $ (Round to the nearest cent.)

Answer 1

a.

Calculate future value as follows:

Future value = present value*(1+rate)^years

Future value = $7,000*(1+4.5%)^5

Future value = $8,723.27

____________________________

b.

Calculate future value as follows:

Future value = present value*(1+rate)^years

Future value = $7,000*(1+8%)^5

Future value = $10,285.30

_________________________

c.

Calculate future value as follows:

Future value = present value*(1+rate)^years

Future value = $7,000*(1+15%)^5

Future value = $14,079.50

_______________________

d.

Calculate future value as follows:

Future value = present value*(1+rate)^years

Future value = $7,000*(1+22%)^5

Future value = $18,918.96