Respuesta :
As per time value of money,
Future value = Present value x (1 + Periodic rate)^Number of periods
Present value = $5,800.00
Periodic rate = 6.1% / 365
Number of periods = 365 x 5 = 1,825 days
Therefore,
Future value = Value in the account after 5 years
= 5800 x (1 + 0.061 / 365)^1825
= $7,868.22
In 5 years, $7,868.22 will be in account.
According to the time value of money hypothesis, the value of money declines over time. Therefore, it is preferable if a specific amount of money is received as soon as feasible. The formula for calculating the time value of money takes into account the current value, the potential future worth, the potential earnings, and the time period. The number of compounding periods for savings accounts also plays a significant role. This is a foundational idea in finance. A sum of money in your possession is worth more than a similar sum that will be paid in the future.
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