Calculate the Future Value of a Deposit

What is the future value of $150 deposited today at 7 percent interest compounded annually for 4 years?

A. $193

B. $199

C. $197

D. $194

Answer:

$194 will be the future value of $150 deposited.

The worth of a present asset at a future date based on an estimated rate of growth is known as future value (FV). Investors and financial planners care about future value because it helps them predict how much an investment made now will be worth in the future. The current value of a future sum of money or stream of cash flows at a predetermined rate of return is known as its present value (PV).

The present value is calculated by taking the future value and multiplying it by a discount rate or the interest rate that may be obtained if invested. The quantity of money that must be invested in order to accomplish a given future goal is referred to as present value.