Determine whether receiving BD 2,042 today is equivalent to receiving BD 3,000 after five (5) years, assuming that the interest rate per annum is 8%

Answer) We will use the formula of compound interest to slove this problem as follows

Compound interest formula is ; Final amount=Initial amount(1+interest rate/number of times interest applied in a period)^number of times interest applied in a period*time period

Following values are given

• Initial amount= BD 2,042
• Time period= 5
• Interest rate=8%
• Number of times interest applied in a period=1(since it is annual)

Now putting these values in formula we get

Final amount=2042(1+0.08)^5=3000.367,

So,Yes having BD 2,042 is equal to receiving BD 3,000 5 years from now at an interest rate of 8%

Now,coming to part 2,here we have to change time period to 3 years,putting values we get

Final amount=2042(1+0.08)^3=2042(1.08)^3=BD 2572.33

So,equivalent of given amount after 3 years at interest rate of 8% per annum would be BD 2572

Answer is complete.Thank you!