Consider the following three investments:
Future valueyearsinterest rate -
1.$50,000 89% per year
2.$20,000 612% per year
3.$35,000 37% per year
The present values of the 3 investments are:
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A. B. C. D.C
Future value = Present value*(1+r)^N for annual compounding. Therefore,
Future valueyearsratePresent Value
1.50,000 89% 50,000/(1.09)^8 = 25,093
2.20,000 612% 20,000/(1.12)^6 = 10,133
3.35,000 37% 35,000/(1.07)^3 = 28,570
Note that the future value must always be greater than the present value.