Question

Q1 What is the future value in seven years of 1200 invested in an account of annual percentage rate of 8 percent, compounded semi annually.

B What is the future value in seven years of 1200 invested in an account of annual percentage rate of 8 percent, compounded annually.

C What is the future value in seven years of 1200 invested in an account of annual percentage rate of 8 percent, compounded monthly.

D What is the future value in seven years of 1200 invested in an account of annual percentage rate of 8 percent, compounded continuously.

Answer 1

1.We use the formula:
A=P(1+r/200)^2n
where
A=future value
P=present value
r=rate of interest
n=time period.

A=$1200(1+0.08/2)^(2*7)

=$1200*1.731676448

=$2078.01(Approx).

b.We use the formula:

A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

A=$1200*(1.08)^7

=$1200*1.713824269

=$2056.59(Approx).

c.We use the formula:

A=P(1+r/1200)^12n
where
A=future value
P=present value
r=rate of interest
n=time period.

A=$1200(1+0.08/12)^(12*7)

=$1200*1.747422051

=$2096.91(Approx).

d.We use the formula:

A=P(e)^rn
where
A=future value
P=present value
r=rate of interest
n=time period.

e=2.71828

A=$1200(2.71828)^(0.08*7)

=$1200*1.750671841

=$2100.81(Approx).