Question

Chris Spear invested $16,700 today in a fund that earns 10% compounded annually. To what amount will the investment grow in 2 years? To what amount would the investment grow in 2 years if the fund earns 10% annual interest compounded semiannually?
a. Investment at 10% annual interest?
b. Investment at 10% annual interest, compounded semiannually?

Answer 1

Answer:

Results are below.

Explanation:

Giving the following information:

Chris Spear invested $16,700 today in a fund that earns 10% compounded annually.

To calculate the future value of the investment, we need to use the following formula:

FV= PV*(1+i)^n

a. Interest rate= 10% compounded annually.

FV= 16,700*(1.10^2)

FV= $20,207

b. Interest rate= 0.1/2= 0.05

n= 2*2= 4

FV= 16,700*(1.05^4)

FV= $20,298.95