Question

Calculate the future value of $1,000 invested today for 5 years if your investment pays 8% compounded semi annually?

Answer 1

Given

Principal Amount = $ 1000

Term ( n ) = 5 Years

Rate of interest = 8% Compounded Semi Annually

We know that Future Value = Present Value ( 1+i/2)^2n [ Note: This formula applieswhen interest compounded semi Annually)

Here i= Rate of interest

n = No.of years

Future Value = Present value (1+i/2)^2n

= $ 1000( 1+8/200)^2*5

= $ 1000( 1+0.04)^10

= $ 1000( 1.04)^10

= $ 1000*1.480244

= $ 1480.24

Hence the Future Value of the amount is $ 1480.24 after 5 years.

If you are having any doubts , Please post a Comment.

Thank you.Please rate it.