Question

Present and future value tables of $1 at 9% are presented below.
PV of $1 FV of $1 PVA of $1 FVAD of $1 FVA of $1
1 0.91743 1.09000 0.91743 1.0900 1.0000
2 0.84168 1.18810 1.75911 2.2781 2.0900
3 0.77218 1.29503 2.53129 3.5731 3.2781
4 0.70843 1.41158 3.23972 4.9847 4.5731
5 0.64993 1.53862 3.88965 6.5233 5.9847
6 0.59627 1.67710 4.48592 8.2004 7.5233
Ajax Company purchased a three-year certificate of deposit for its building fund in the amount of $290,000. How much should the certificate of deposit be worth at the end of three years if interest is compounded at an annual rate of 9%?
A. $374,300.
B. $732,816.
C. $375,559.
D. $734,075.

Answer 1

Answer: $375,559

Explanation:

You are looking for the future value of the certificate of deposit assuming it was being compounded by 9% per year for 3 years.

Given the factor tables above, the formula would be:

= Certificate of deposit amount * Future value factor, 3 years, 9%

= 290,000 * 1.29503

= 375,558.7

= $375,559