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JulijaS [17]
3 years ago
14

What is the future value of $12,000 after 5 years if the appropriate interest rate is 6%, compounded semiannually?

Business
1 answer:
gladu [14]3 years ago
6 0

Answer:

FV = $16126.99655 rounded off to $16127

Explanation:

To calculate the future value of a sum of money, we simply multiply the present value by (1 + interest rate) for the period of time that we require the amount to be compounded. Thus, the formula for the future value of a sum of amount with annual compounding is,

FV = P * (1+i)^t

Where,

  • FV is future value
  • PV is present value
  • i is the interest rate
  • t is the period of time

For semi annual compounding, we simply divide the annual i by 2 and multiply the t by 2. So, Future value of an amount with semi annual compounding will be,

FV = P * (1 + i/2)^t*2

FV = 12000 * (1 + 0.06/2)^5*2

FV = 12000 * (1+0.03)^10

FV = $16126.99655 rounded off to $16127

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