You are planning to invest $2,500 today for three years at a nominal interest rate of 9 percent with annual compounding a What would be the future value (FV) of your investment b Now assume that inflation is expected to be 3 percent per year over the same three year period What would be the investm...

You are planning to invest $2,500 today for three years at a nominal interest rate of 9

Question:

You are planning to invest $2,500 today for three years at a nominal interest rate of 9 percent with annual compounding.
a. What would be the (FV) of your investment?
b. Now assume that inflation is expected to be 3 percent per year over the same three-year period. What would be the investment’s FV in terms of purchasing power?
c. What would be the investment’s FV in terms of purchasing power if inflation occurs at a 9 percent annual rate?
Future Value
Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth...