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Mekhanik [1.2K]
4 years ago
7

What sum of money today is equivalent to $8,250 2 years from now, if annual interest rate is 4%, compounding semi-annually?

Business
1 answer:
Mariulka [41]4 years ago
5 0

Answer:

$7,621.72

Explanation:

The equation that describes the future value (FV) of an investment (P) at an interest rate (r) for a period of n years, compounded semi-annually is:

FV = P*(1+\frac{r}{2})^{2n}

The amount required to yield $8,250 after 2 years at a rate of 4% per year is:

8,250 = P*(1+\frac{0.04}{2})^{2*2} \\P=\$7,621.72

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