If PV is $45,000 and the Average Rate of Inflation is 3% with 4 years until Retirement, what is the FV?
To calculate the Future Value (FV) of an investment, we need to use the formula:
FV = PV * (1 + r)^n
Where:
PV is the present value (initial investment),
r is the average rate of inflation expressed as a decimal, and
n is the number of years.
In this case, the present value (PV) is $45,000, the average rate of inflation (r) is 3% (or 0.03 as a decimal), and there are 4 years (n) until retirement.
Now, let's substitute the given values into the formula and calculate the Future Value (FV):
FV = $45,000 * (1 + 0.03)^4
First, let's calculate (1 + 0.03)^4:
(1 + 0.03)^4 = 1.03^4 = 1.12550875
Now, we can multiply the present value (PV) by this result:
FV = $45,000 * 1.12550875 = $50,647.89
Therefore, the Future Value (FV) of the investment after 4 years will be approximately $50,647.89.