Personal Finance 1st Edition by Jack R. Kapoor

Exercise 5

Determining the Future Value of Education. Jenny Franklin estimates that as a result of completing her master’s degree, she will earn $7,000 a year more for the next 40 years. (Obj. 1)

a. What would be the total amount of these additional earnings?

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b. What would be the future value of these additional earnings based on an annual interest rate of 6 percent? (Use Table 1–B in the Chapter 1 Appendix.)

Step 1 of 2

Additional earnings is $7,000

Number of Years is 40 years

a) Total amount of additional earnings:

The total amount of earnings can be calculated by:

Substitute the values in the formula:

Total amount of additional earnings will be $280,000