Question

ABC Company intends to put $35,000 into its savings account
at the beginning of every six months for the next five years.
Assume that the savings account earns 12% interest compounded
semi-annually.

Calculate the amount of interest that ABC Company will have
earned at the end of the five years.

To answer this question use the future value table factors
given below. No credit will be awarded for this question
using a means other than the table factors given below to
answer this question.

Factors from the future value of a lump sum table for:

i = 3%:
n = 5      n = 10      n = 15      n = 20 
1.159      1.344       1.558       1.805

i = 4%:
n = 5      n = 10      n = 15      n = 20 
1.217      1.480       1.801       2.191

i = 6%:
n = 5      n = 10      n = 15      n = 20 
1.338      1.791       2.397       3.207

i = 12%:
n = 5      n = 10      n = 15      n = 20 
1.762      3.106       5.474       9.646


Factors from the future value of an annuity table for:

i = 3%:
n = 5      n = 10      n = 15      n = 20 
5.309      11.464      18.599      26.871

i = 4%:
n = 5      n = 10      n = 15      n = 20 
5.416      12.006      19.141      29.778

i = 6%:
n = 5      n = 10      n = 15      n = 20 
5.637      13.180      23.276      36.786

i = 12%:
n = 5      n = 10      n = 15      n = 20 
6.353      17.549      37.280      63.440

Answer 1

Ans:

Investment Amount : $35,000

Investment Period : 6 Months

Interest Rate : 12%

Periodic Interest Rate : 6%

Time Period : 5 Years

Number of periods : 10 Months

FV Factor @6% for 10 Periods (5 Years) : 13.180

Value of Investment at the end of 5 Years : $35,000 * 13.180 = $461,300

Total Amount Deposited in 5 Years : $35,000 * 10 = $350,000

Interest Earned at the end of Five Years : $461,300 - $350,000 = $111,300

Please Note that Factor value for Annuity payment @ Beginning @6% for 10 period is : 13.971. Which is not given in above provided table factors. In that Case interest earned amount will be : $138,985

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