1. Find Future value FV = ?
Present value C = 1000, Interest Rate i = 10%, Time n = 3 Year,
Interest compounded = Year (1/year)
for Present value using Compound Interest method
Solution:
`C=1000`
`i=10%=0.1` per year (Interest rate)
`n=3` years (Number of periods)
Now, Future value (Compound Interest) formula is
`FV=C*(1+i)^n`
`=1000*(1+0.1)^3`
`=1000*(1.1)^3`
`=1000*(1.331)`
`=1331`
2. Find Future value FV = ?
Present value C = 5000, Interest Rate i = 10%, Time n = 2 Year,
Interest compounded = Year (1/year)
for Present value using Compound Interest method
Solution:
`C=5000`
`i=10%=0.1` per year (Interest rate)
`n=2` years (Number of periods)
Now, Future value (Compound Interest) formula is
`FV=C*(1+i)^n`
`=5000*(1+0.1)^2`
`=5000*(1.1)^2`
`=5000*(1.21)`
`=6050`
This material is intended as a summary. Use your textbook for detail explanation.
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