ACCA MA · Chapter 11 · Question 3 of 10
$5,000 is invested at 6% per year, compounded annually. What will the investment be worth at the end of 4 years (to the nearest $)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $6,312
Explanation
Future value = 5,000 x (1.06) to the power 4 = 5,000 x 1.262477 = $6,312. Simple interest would give 5,000 + (4 x 300) = $6,200. Compounding for 5 years gives $6,691, and $3,960 is the present value of $5,000 received in 4 years.
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