A pension fund manager invests $10 million in a debt obligation that promises to pay 7.3% per year for four years. What is the future value of the $10 million?
What will be an ideal response?
To determine the future value of any sum of money invested today, we can use the future value equation, which is: Pn= P0 (1 + r)nwhere n = number of periods, Pn= future value n periods from now, P0= original principal and r = interest rate per period. Inserting in our values, we have: P4= $10,000,000(1.073)4= $10,000,000(1.325558466) =$13,255,584.66 .
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