Question

Sharon Lee wants to accumulate $10,000 by the end of 12 years. If the annual interest rate is 8.00 percent and interest compounds semiannually, how much will she have to invest today to achieve her goal?

Answer 1

Answer:

Amount invested that is principal amount will be $3971.137

Explanation:

We have given that Sharon Lee wants to accumulate $10000 by the end of 12 years

Future value A = $10000 after 12 years

Rate of interest is given  r = 8%

Time period n = 12 year ( which is required to accumulate the future value $10000)

We have to fond the amount invested, that is principal amount

We know that future value is given by

$A=P(1+\frac{r}{100})^n$

$10000=P(1+\frac{8}{100})^{12}$

$10000=P\times 1.08^{12}$

$10000=P\times 2.5181$

P = $3971.137

So the amount invested that is principal amount will be $3971.137