Milner company will invest $200,000 today. The investment will earn 6% for 5 yearswith no funds withdrawn. In 5 years, the amount in the investment fund is A) $200,000 B) $260,000 C) 267,646 D) $268,058
That would be 200,000 times the future value of a single sum factor (which is found in the tables) 6% at 5 years which is 1.33823. So 200,000(1.33823)=267,646 the answer is C.
200,000
To determine the amount in the investment fund after 5 years, we need to use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the amount in the investment fund after time t
P = the principal amount invested initially
r = the annual interest rate (expressed as a decimal)
n = the number of times that interest is compounded per year
t = the number of years
Given that the principal amount (P) is $200,000, the annual interest rate (r) is 6% (or 0.06 as a decimal), and the time period (t) is 5 years, we can substitute these values into the formula to calculate the amount in the investment fund (A).
A = 200,000(1 + 0.06/1)^(1 * 5)
A = 200,000(1 + 0.06)^5
A = 200,000(1.06)^5
Calculating this expression, we find:
A ≈ $267,646
Therefore, the amount in the investment fund after 5 years would be approximately $267,646. So the correct answer is C) $267,646.