Homework Answers
a) If Interest is Compounded Annually
Interest rate = 12%
No. of Periods = 3 yrs
Future Value of Savings = Initial Deposit*Future Value Factor(12%, 3)
= $6,500*1.405 (From the given table)
= $9,132.50
b) If Interest is Compounded Semiannually
Semi annual Interest rate = 12%*6/12 = 6%
No. of Semiannual Periods = 3 yrs*2 = 6 periods
Future Value of Savings = Initial Deposit*Future Value Factor(6%, 6)
= $6,500*1.419 (From the given table)
= $9,223.50
c) If Interest is Compounded Quarterly
Quarterly Interest rate = 12%*3/12 = 3%
No. of Periods = 3 yrs*4 = 12 periods
Future Value of Savings = Initial Deposit*Future Value Factor(3%, 12)
= $6,500*1.426 (From the given table)
= $9,269
| Future Value | ||
| a. | Annually | 9,132.50 |
| b. | Semiannually | 9,223.50 |
| c. | Quarterly | 9,269 |
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