Question

sarah plans to buy a car in five years, so she invests $10,000. she receives an annual interest rate of 5%, compounded semiannually. what’s the future value of the $10,000 investment in five years????

Answer 1

Answer:

$12800.85

Step-by-step explanation:

Given information: Principal = $10,000, rate of interest = 0.05, number of times interest compounded=2, time = 5 years.

The formula for amount after compound interest is

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

where,

P is principal.

r is rate of interest.

n is number of times interest compounded per unit period.

t is number of periods.

Substitute the given values in the above formula.

$A=10000(1+\dfrac{0.05}{2})^{2(5)}$

$A=10000(1.025)^{10}$

$A=12800.845442$

$A\approx 12800.85$

Therefore, the future value of the $10,000 investment in five years is $12800.85.