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Problem 5-19 Present Values (LO2) If the interest rate this year is 7.9% and the interest rate next year will be 9.9%, what is the future value of $1 after 2 years

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Answer:

FV= $1.19

Explanation:

Giving the following information:

The interest rate this year is 7.9% and the interest rate next year will be 9.9%

PV= $1

To calculate the future value, we need to use the following formula:

FV= PV*(1+i)^n

FV1= 1*1.079= 1.079

FV2= 1.079*1.099= $1.19

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