Chapter 1
Q. 1.10
Future worth/compound interest tables. You have $10K in an account earning 10% per year. What will be in the account in 5 years?
Step-by-Step
Verified Solution
Because you know P and want to find F, use the F/P factor. Because i is 10%, use the 10% table. To find the correct factor, go down the F/P column to where it crosses the n = 5 row. The factor is 1.611.
| P/A | F/A | A/P | A/F | P/F | F/P | ||
| n | (P/A, i%, n) | (F/A, i%, n) | (A/P, i%, n) | (A/F, i%, n) | (P/F, i%, n) | (F/P, i%, n) | n |
| 1 | 0.909 | 1.000 | 1.100 | 1.000 | 0.909 | 1.100 | 1 |
| 2 | 1.736 | 2.100 | 0.576 | 0.476 | 0.826 | 1.210 | 2 |
| 3 | 2.487 | 3.310 | 0.402 | 0.302 | 0.751 | 1.331 | 3 |
| 4 | 3.170 | 4.641 | 0.315 | 0.215 | 0.683 | 1.464 | 4 |
| 5 | 3.791 | 6.105 | 0.264 | 0.164 | 0.621 | 1.611 | 5 |
| 6 | 4.355 | 7.716 | 0.230 | 0.1296 | 0.5645 | 1.772 | 6 |
| 7 | 4.868 | 9.487 | 0.205 | 0.1054 | 0.5132 | 1.949 | 7 |
| 8 | 5.335 | 11.436 | 0.187 | 0.0874 | 0.4665 | 2.144 | 8 |
| 9 | 5.759 | 13.579 | 0.174 | 0.0736 | 0.4241 | 2.358 | 9 |
| 10 | 6.145 | 15.937 | 0.163 | 0.0627 | 0.3855 | 2.594 | 10 |
| 11 | 6.495 | 18.531 | 0.154 | 0.0540 | 0.3505 | 2.853 | 11 |
| 12 | 6.814 | 21.384 | 0.147 | 0.0468 | 0.3186 | 3.138 | 12 |
| 13 | 7.103 | 24.523 | 0.141 | 0.0408 | 0.2897 | 3.452 | 13 |
| 14 | 7.367 | 27.975 | 0.136 | 0.0357 | 0.2633 | 3.797 | 14 |
| 15 | 7.606 | 31.772 | 0.131 | 0.0315 | 0.2394 | 4.177 | 15 |
F = P(F/P, 10%, 5) = $10,000(1.611) = $16,110