Question

# A local bank is offering 9% compounded semi-annually on savings accounts.  If you deposit \$1000 today, how...

A local bank is offering 9% compounded semi-annually on savings accounts.  If you deposit \$1000 today, how much will you have in 2.5 yrs.

a. 1,240.41

b. 1,295.03

c. 1,246.18

d. 1,166.32

e. 1192.5

A local bank is offering 9% compounded semi-annually on savings accounts.  If you deposit \$1000 today, how much will you have in 2.5 yrs.

a. 1,240.41

b. 1,295.03

c. 1,246.18

d. 1,166.32

e. 1192.5

Ans:- In this question, we need to find the Future Value.

Future Value is given by PV * (1+r)^n, where PV is the Present Value, r is the rate of return per period and n is the number of periods.

PV=\$1000, r=9%/2 (since it is compounded semi-annually) = 4.5% = 0.045, n = 2.5 * 2 = 5.

= \$1000 * (1 + 0.045)^5 = \$1,246.18.

Therefore Future Value at the end of 2.5 years will be \$1,246.18. option (c) is the right answer.

Since both the questions are same, therefore answers will also be the same.

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