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Time value of money calculations can be solved using a mathematical equation, a financial calculator, or a spreadsheet. Which of the following equations can be used to solve for the future value of a lump sum? FV/(1 + r) n PMT x ({1 – [1/(1 + r) n ]}/r) x (1 + r) PV x (1 + r) n PMT/r

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Answer:

Explanation:

A lumpsum is a one-time cashflow. Future value of this lumpsum is its amount after earning interest through compounding process.

The formula for FV of a lumpsum  is as follows;

FV = PV(1+r )^n

PV is the onetime present cashflow

r = interest rate

n = total duration of investment

For example , if you deposit $400 into a savings account that pays 5% interest rate for 2 years. Your future value at the end of 2 years would plugged in the formula as follows;

FV = 400 (1 +0.05)^2

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