Table of contents

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1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

What is the future value of $1,200 invested for 20 years at an annual interest rate of 6%, compounded annually? (Use the formula: $FV = PV \times (1 + r)^n$)

$4,200.00

$3,846.48

$6,120.00

$2,400.00

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Verified step by step guidance

Step 1: Identify the variables in the formula for future value (FV = PV × (1 + r)^n). Here, PV (Present Value) is $1,200, r (annual interest rate) is 6% or 0.06, and n (number of years) is 20.

Step 2: Substitute the values into the formula. The formula becomes FV = 1200 × (1 + 0.06)^20.

Step 3: Calculate the term inside the parentheses first. Add 1 to the interest rate: 1 + 0.06 = 1.06.

Step 4: Raise the result (1.06) to the power of 20. This represents the compounding effect over 20 years.

Step 5: Multiply the present value (1200) by the result from Step 4 to find the future value. This will give you the final amount after 20 years of compounding.