If the present value is $123.52 and the rate of return is 0.069, how much will you have in one year?

Question

BlackTom AI · Accepted Answer

The task presents a present value and a rate of return and asks for the value in one year, so we should apply the standard future value formula FV = PV × (1 + r).

Step 1: Identify the given numbers. PV = 123.52 and r = 0.069 (which is 6.9%).
Step 2: Compute the growth factor: 1 + r = 1 + 0.069 = 1.069.
Step 3: Multiply PV by the growth factor: 123.52 × 1.069 = 132.04288.
Step 4: Round to typical currency precision. Rounding to two decimal places gives 132.04.

So, based on the standard calculation, the amount in one year should be approximately 132.04. The provided answer of 131.98 would correspond to a slightly different growth factor (131.98 / 123.52 ≈ 1.0680, which implies r ≈ 0.0680 or 6.80%), indicating a minor mismatch that could arise from rounding at an intermediate step or a different compounding convention. If one were to use continuous compounding, FV = PV × e^(r) would yield a different result (approximately 132.30 for these numbers), further illustrating that small changes in calculation assumptions can shift the final figure.

In summary, with the straightforward annual (discrete) compounding assumption, the correct result is about 132.04, not 131.98. The discrepancy likely stems from rounding or an alternative interpretation of the rate.

FINA2720.MERGED.202610 Practice with Respondus and Time Value of Money- Requires Respondus LockDown Browser

If the present value is $123.52 and the rate of return is 0.069, how much will you have in one year?

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