Answer:
Results are below.
Step-by-step explanation:
Giving the following information:
Annual interest rate (i)= 0.055
Initial investment (PV)= $10,000
Number of years (n)= 7
To calculate the future value (FV), we need to use the following formula (except in d):
FV= PV*(1+i)^n
a.
Semiannual interest rate= 0.055/2= 0.0275
Number of semesters= 7*2= 14
FV= 10,000*(1.0275^14)
FV= $14,619.94
b.
Quarterly rate= 0.055/4= 0.01375
Number of quarters= 7*4= 28
FV= 10,000*(1.01375^28)
FV= $14,657.65
c.
Monthly interest rate= 0.055/12= 0.0045833
Number of months= 7*12= 84
FV= 10,000*(1.0045833^84)
FV= $14,683.18
d.
To calculate the future value using continuous compounding, we need to use the following formula:
FV= PV*e^(n*i)
FV= 10,000*e^(7*0.055)
FV= $14,696.14
