Question

For a loan of $15,000 at 4% interest compounded semiannually over 4 years find the following:

a) Future Value

b) Compound Interest

Answer 1

1.Information provided:

Present value= $15,000

Time= 4 years*2= 8 semi-annual periods

Interest rate= 4%/2= 2% per semi-annual period

The question is solved by calculating the future value.

Enter the below in a financial calculator to compute the future value:

PMT= -15,000

N= 8

I/Y= 2

Press the CPT key and FV to compute the future value.

The value obtained is 17,574.89.

Therefore, the future value is $17,574.89.

2.Compound Interest= $17,574.89 - $15,000

= $2,574.89.