John Resch is considering two plans for building an education fund for his children. Plan AInvest $3,000
John Resch is considering two plans for building an education fund for his children.
Plan A—Invest $3,000 at the end of each year for ten years. This investment will earn 8% annual interest.
Plan B—Invest $25,000 now, earning 6% annual interest for ten years.
1. Before making any calculations, which plan would you expect to provide the larger future amount? Using the tables provided in the appendix, calculate the future value of each plan. Which plan provides the larger amount at the end of ten years?
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...
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