A company wants to deposit a sum of money now to purchase a machine 2 years from now that will cost $40,000.
How much would have to be deposited in an account that pays 20% per year, compounded quarterly?
The future value equals the compounded value of current saving. Where the compound rate is the interest rate. The higher the interest rate, the higher is the future value. In addition the shorter the compound periods, the higher the future value is.
Answer and Explanation:
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fromChapter 5 / Lesson 16
This lesson will give an overview of and explain the future value formula. Also in this lesson, various examples will be explored using the future value formula.