Question

PV= $1,000 and the interest rate is 8% compounded semiannually for 9 years. what is the FV?

Answer 1

Answer -

FV = PV ( 1 + i ) ⁿ

PV= $1,000

Interest is compounded semiannually then we divide the interest rate with 2 and multiply the no. of period with 2 as when interest is compounded semiannually then in a year interest is charged for two times

n = No. Of period = 9 years × 2 = 18

i = Interest rate = 8% / 2 = 4% or 0.04

FV = $1,000 ( 1 + 0.04 ) ¹⁸

FV = $1,000 ( 1.04 ) ¹⁸

FV = 2,025.82

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