Question

what is the future value if 5000.00 is invested for 2 years at 5% compounded every 4 months?The future value is?

Answer 1

We know that

• The principal is $5000.

,

• The interest rate is 5%.

,

• The compounding period is every 4 months.

,

• The time is 2 years.

We have to use the compounding interest formula

$A=P(1+\frac{r}{n})^{nt}$

Where P = 5000, r = 0.05, n = 3, and t = 2.

$\begin{gathered} A=5000(1+\frac{0.05}{3})^{3\cdot2} \\ A\approx5,521.30 \end{gathered}$

Hence, the future value is $5,521.30.