Kendall invests $12,000 today in an investment that earns 8 percent per year (compounded annually) for...

 

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Kendall invests $12,000 today in an investment that earns 8 percent per year (compounded annually) for 20 years. The average inflation rate is expected to be 3 percent per year. He will have much more than $12,000 in 20 years BUT what would this future amount be if expressed in today's dollars? (Hint: Find the FV and then discount it back to t=0 using 3% as your discount rate.) Kendall invests $12,000 today in an investment that earns 8 percent per year (compounded annually) for 20 years. The average inflation rate is expected to be 3 percent per year. He will have much more than $12,000 in 20 years BUT what would this future amount be if expressed in today's dollars? (Hint: Find the FV and then discount it back to t=0 using 3% as your discount rate.)

Answer rating: 100% (QA)

To calculate the future value FV of Kendalls investment after 20 years we can use ... View the full answer