Question

Future Value for Various Compounding Periods

Find the amount to which $650 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

Amount available PV = $650

a). When interest rate r = 12% compounded annually for 5 years.

Final value = PV*(1+r/n)^(n*t)

For compounded annually, n = 1

=> FV = 650*1.12^5 = $1145.52

b). When interest rate r = 12% compounded semiannually for 5 years.

Final value = PV*(1+r/n)^(n*t)

For compounded semiannually, n = 2

=> FV = 650*(1+0.12/2)^(2*5) = $1164.05

c). When interest rate r = 12% compounded quarterly for 5 years.

Final value = PV*(1+r/n)^(n*t)

For compounded quarterly, n = 4

=> FV = 650*(1+0.12/4)^(4*5) = $1173.97

d). When interest rate r = 12% compounded monthly for 5 years.

Final value = PV*(1+r/n)^(n*t)

For compounded monthly, n = 12

=> FV = 650*(1+0.12/12)^(12*5) = $1180.85