Question

Future Value for Various Compounding Periods

Find the amount to which $575 will grow under each of the following conditions. Do not round intermediate calculations. Round your answers to the nearest cent.

1. 12% compounded annually for 5 years.

   $  

2. 12% compounded semiannually for 5 years.

   $  

3. 12% compounded quarterly for 5 years.

   $  

4. 12% compounded monthly for 5 years.

   $  

Answer 1

a.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=575*(1.12)^5

=575*1.76234168

=$1013.35(Approx)

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

A=575*(1+0.12/2)^(2*5)

=575*1.7908477

=$1029.74(Approx)

c.We use the formula:
A=P(1+r/4)^4n
where
A=future value
P=present value
r=rate of interest
n=time period.

A=575*(1+0.12/4)^(4*5)

=575*1.80611123

=$1038.51(Approx)

d.We use the formula:
A=P(1+r/12)^12n
where
A=future value
P=present value
r=rate of interest
n=time period.

A=575*(1+0.12/12)^(12*5)

=575*1.8166967

=$1044.60(Approx).