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

What is the future value (FV) of an ordinary annuity where $500 is invested at the end of each year for 20 years at an annual interest rate of 10%? (Use the formula: $FV = PMT \times \frac{(1 + r)^n - 1}{r}$, where $PMT = 500$, $r = 0.10$, $n = 20$.)

$28,645.50

$25,000.00

$31,526.25

$20,000.00

Previous problemNext problem

Verified step by step guidance

Step 1: Understand the formula for the future value (FV) of an ordinary annuity. The formula is: FV = PMT × ((1 + r)^n - 1) / r, where PMT is the payment amount, r is the annual interest rate, and n is the number of periods.

Step 2: Identify the given values from the problem. Here, PMT = 500 (payment made at the end of each year), r = 0.10 (annual interest rate), and n = 20 (number of years).

Step 3: Substitute the given values into the formula. Replace PMT with 500, r with 0.10, and n with 20 in the formula: FV = 500 × ((1 + 0.10)^20 - 1) / 0.10.

Step 4: Break down the calculation into smaller parts. First, calculate (1 + r)^n, which is (1 + 0.10)^20. Then subtract 1 from the result to find ((1 + r)^n - 1). Finally, divide this value by r (0.10).

Step 5: Multiply the result from Step 4 by PMT (500) to find the future value (FV). This will give you the total amount accumulated after 20 years of investing $500 annually at a 10% interest rate.