Question

Find the amount to which $625 will grow under each of the following conditions. Do not round intermediate calculations. Round your answer to the nearest cent.
A. 4% compounded annually for 5 years
____________ $
B. 4% compounded semiannually for 5 years
____________ $
C. 4% compounded quarterly for 5 years
____________ $
D. 4% compounded monthly for 5 years
____________ $

Answer 1

Answer:

Results are below.

Explanation:

To calculate the future value, we need to use the following formula:

FV= PV*(1+i)^n

a) i= 0.04 annually compounded

n= 5

PV= $625

FV= 625*(1.04^5)

FV= $760.41

b) i= 0.04/2 = 0.02 semiannually compounded

n= 5*2= 10

PV= $625

FV= 625*(1.02^10)

FV= $761.87

c)  i= 0.04/4 = 0.01 quarterly compounded

n= 5*4= 20

PV= $625

FV= 625*(1.01^20)

FV= $762.62

d) i= 0.04/12 = 0.0033 monthly compounded

n= 5*12= 60

PV= $625

FV= 625*(1.003333^60)

FV= $763.11