Question

How much would $1, growing at 3.5% per year, be worth after 75 years?

Answer 1

Answer:

The correct answer is: $13.20.

Explanation:

The time value of money is a concept that states that a dollar today is always worth more than a dollar tomorrow based on the interest that can be accrued. In that sense, the sooner the money is received, the better since there will be more time for the interest to grow. The future value of money is calculated with the following formula:

FV=PV x [1+ i/n]^((n x t))

Where:

• FV = Future value of money
• PV = Present value of money
• i = interest rate
• n = number of compounding periods per year
• t = number of years

In the example:

FV = ?

PV = $1

i = 3,5%

n = 1

t = 75

Thus,

FV= $1 x [1+ (3,5%)/1]^((1 x 75))

FV= $1 x [1+ (35/10  x 1/100)/1]^((75))

FV= $1 x [1+ (35/1000)/(1/1)]^((75))

FV= $1 x [1+ 35/1000]^((75))

FV= $13,1985 ≅$13,20

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Answer 2

1×3.5×75=262.5 got it??