Table of contents

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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Suppose you deposit \$5,000 into a savings account that earns 6\% annual interest, compounded annually. What is the total balance in the account after 40 years?

$32,000.00

$51,429.50

$19,500.00

$48,000.00

Previous problemNext problem

Verified step by step guidance

Step 1: Understand the formula for compound interest. The formula is: $ A = P \times (1 + r)^t $, where $ A $ is the total balance, $ P $ is the principal amount (initial deposit), $ r $ is the annual interest rate (in decimal form), and $ t $ is the number of years the money is invested or borrowed.

Step 2: Identify the values given in the problem. Here, $ P = 5000 $, $ r = 0.06 $ (6% annual interest rate converted to decimal), and $ t = 40 $ years.

Step 3: Substitute the values into the formula. The equation becomes: $ A = 5000 \times (1 + 0.06)^{40} $.

Step 4: Simplify the expression inside the parentheses first: $ 1 + 0.06 = 1.06 $. Then raise $ 1.06 $ to the power of $ 40 $.

Step 5: Multiply the result of $ 1.06^{40} $ by $ 5000 $ to calculate the total balance $ A $. This will give you the final amount in the savings account after 40 years.