Personal Finance 1st Edition by Jack R. Kapoor

Exercise 28

Compounding Investment Returns. Nancy Cardoza invested $2,450 in ExxonMobil stock because her research indicated the company should average an 8 percent return over the next four years. If ExxonMobil does earn 8 percent each year, what will her $2,450 investment be worth at the end of four years. (To solve this problem, you may want to use Exhibit 1-A in the appendix that follows Chapter 1.)

Exhibit 1-A Future value (compounded sum) of $1 after a given number of time periods

 

Step 1 of 2

Calculate the Future Value:

Future value is the compounding value of the cash flows using the required rate of return.

The formula for future value is