Question

Pam, when she turned 25, made an investment of $20,000 at an interest rate of 6.5% compounded semi-annually. Now that she is 50 years old, how much is the investment worth now. A. $53,250 B. $44,491.96 C. $32,500 98,976.71

Answer 1

Answer:

D. $ 98,976.71

Explanation:

The formula for the future worth of the a present amount at compounding interest rate is given as:

FV = PV(1+r/n)^nt

where, (taking the age of 25 as present time and 50 years as future)

FV = Future Value = ?

PV = Present Value = $ 20,000

r = interest rate = 6.5% = 0.065

n = no. of periods within an year = 2

t = total no. of years passed = 50 - 25 = 25 years

Therefore,

FV = ($ 20,000)(1 + 0.065/2)^(2)(25)

FV = $ 98,976.71

Thus the correct answer is D. $ 98,976.71