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To what amount will the investment grow in 4 years? To what amount would the investment grow in 4 years if the fund earns 8% annual interest compounded semiannually? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

Respuesta :

facundobuzzetti

Answer:

Instructions are listed below.

Explanation:

We weren't provided with enough information to answer the requirements. But, I will give the formulas for different situations and a small example to guide an answer.

There are two different ways to invest in order to reach the desired goal. One is a lump sum amount and others are timely deposits (annual, semiannual, quarterly, etc).

Lump-sum:

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

FV= PV*(1+i)^n

For example, imagine a lump sum deposit of $5,000 for 5 years at an interest rate of 8% compounded annually:

FV= 5,000*(1.08^5)= $7,346.64

Now, if the interest rate is semiannually.

n= 2*5=10

i= 0.08/2= 0.04

FV= 5,000*(1.04^10)= $7,401.22

Timely deposit:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

For example, imagine an annual deposit of $1,000 for 5 years at an interest rate of 8% compounded annually:

FV= {1,000*[(1.08^5)-1]} / 0.08= $5,866.60

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