Crane Company will invest $650000 today. The investment will earn 8% for 3 years

Question

Crane Company will invest $650000 today. The investment will earn 8% for 3 years, with no funds withdrawn. In 3 years, the amount in the investment fund is?

FVFn,i=(1+i)n

(n) Periods

2%

2½%

3%

4%

5%

6%

1

1.02000

1.02500

1.03000

1.04000

1.05000

1.06000

2

1.04040

1.05063

1.06090

1.08160

1.10250

1.12360

3

1.06121

1.07689

1.09273

1.12486

1.15763

1.19102

4

1.08243

1.10381

1.12551

1.16986

1.21551

1.26248

5

1.10408

1.13141

1.15927

1.21665

1.27628

1.33823

6

1.12616

1.15969

1.19405

1.26532

1.34010

1.41852

7

1.14869

1.18869

1.22987

1.31593

1.40710

1.50363

8

1.17166

1.21840

1.26677

1.36857

1.47746

1.59385

9

1.19509

1.24886

1.30477

1.42331

1.55133

1.68948

10

1.21899

1.28008

1.34392

1.48024

1.62889

1.79085

Table6.1FUTURE VALUE OF 1 (FUTURE VALUE OF A SINGLE SUM)

FVFn,i=(1+i)n

(n) Periods

2%

2½%

3%

4%

5%

6%

1

1.02000

1.02500

1.03000

1.04000

1.05000

1.06000

2

1.04040

1.05063

1.06090

1.08160

1.10250

1.12360

3

1.06121

1.07689

1.09273

1.12486

1.15763

1.19102

4

1.08243

1.10381

1.12551

1.16986

1.21551

1.26248

5

1.10408

1.13141

1.15927

1.21665

1.27628

1.33823

6

1.12616

1.15969

1.19405

1.26532

1.34010

1.41852

7

1.14869

1.18869

1.22987

1.31593

1.40710

1.50363

8

1.17166

1.21840

1.26677

1.36857

1.47746

1.59385

9

1.19509

1.24886

1.30477

1.42331

1.55133

1.68948

10

1.21899

1.28008

1.34392

1.48024

1.62889

1.79085

Explanation / Answer

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

Hence

A=$650,000(1.08)^3

=$650,000*1.25971

=$818811.50(Approx).

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