Question

Assume that you will invest $1000 on September 2, 2007, $1000 on September 2, 2008, and $1000 on September 2, 2009. What is the value of those investments the instant after you invest the $1000 on September 2, 2009? Assume an interest rate of 15%, compounded semi-annually.

Answer 1

Answer : Calculation of  value of those investments the instant after you invest the $1000 on September 2, 2009 :

Future value = Present value * (1 + rate per period)^n

here rate per period is 15%/2 = 7.5%

Value of Investment on september 2 , 2008 before 1000 deposit = [1000 * (1 + 0.075)^2 ] = 1155.625

Value of Investment on september 2 , 2009 before 1000 deposit = [(1155.625 + 1000) * (1 + 0.075)^2 ] = 2491.094

Value of Investment on september 2 , 2009 after 1000 deposit instant = [(2491.094 + 1000) ] = $3491.094