An investment of $6000 earns interest at 2.5% per annum compounded semi- annually for 5 years. At the that time the interest rat
1 answer:
The accumulated value be $7212.10 2 years after the change.
Calculation
FV = PV × (1 + r / k) (here k = no. of times compounded in a year)
so, in first case
FV = 6000 × (1 + 2.5%/ 2)
= $6793.62
The FV becomes PV in the second case
So, FV = 6793.62 × (1 + 3%/ 4)
= $7212.10
<h3>What is accumulated value?</h3>
The sum of an investment's present holdings, including the money invested and interest accrued thus far, is known as its accumulative value. Because it refers to the whole acquired value of a whole life insurance policy, the accumulative value is significant in the insurance industry. Accumulated value, also known as accumulated amount or cash value, is determined by adding the initial investment and any interest that has already been accrued.
When the owner of a whole (or universal) life insurance policy starts making monthly premium payments, the accumulated value of the policy starts to increase for insurance reasons. These premium payments are divided into two halves by an insurance company. The first part pays for the costs of the fundamental insurance coverage. The insurance company places the second share in an internal account where it serves as a form of investment that builds cash value.
Learn more about accumulative value
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