What will 195,000 grow to in 6 years time if it is invested today in an account with an annual interest rate of 8%?
The amount of 195,000 (PV) is invested now at the start of period 1, and needs to be compounded forward 6 years (n) to the end of period 6, at a discount rate of 8% (i).
This problem is solved using the future value of a lump sum formula as follows.
PV = 195,000 n = 6 i = 8% FV = PV x (1 + i)n FV = 195,000 x (1 + 8%)6 FV = 309,440.49
The amount of 195,000 invested today in an account earning 8% compound interest, will grow in to an amount of 309,440.09 in 6 years time.
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