00:01
The present value that is p .v is given at $30 ,000 and the rate of interest annually that is 5%.
00:23
And so in first a part we need to find and the also given the number of period t is equal to 18 years.
00:37
In the first step -art the rate of interest is compounded annually then our new rate of interest will be 5 % this is equal to 0 .05 a number of installment n is equal to 18 multiplied to 1 this is equal to 18 so our present value so our future value fp is to the present value over 1 plus r % to the whole power n so this is equal to the present value is 30 ,000 over 1 plus r % that is 0 .05 whole power 18 so this is equal to 30 ,000 over 1 .05 to the whole power 18 so this is equal to 12 ,465 .61 .61 .61.
02:04
So, our future value will be $12 ,465 .61.
02:18
Now, in part b, the rate of interest compounded quarterly, then rate of interest for quarterly will be 5 % over 4.
02:41
This is equal to 0 .0125 and number of installment n will be 18 multiplied to 4 this is equal to 72 then our future value fb is equal to present value over 1 plus r % to the whole power n this is equal to 30 ,000 over 1 plus 0 .0 125 to the whole power 72 so this is equal to 30 ,000 over 1 .0 125 to the whole power 72 this is equal to 12 ,000 sorry 12, 265 .32.
03:44
So our required future value fb is equal to 12 ,265 .32...
