Question

1. How much interest is earned in an account by the end of 5 years if $30,000 is deposited and interest is 4% per year, compounded semi-annually?

2. What is the balance in an account at the end of 10 years if $6,500 is deposited today and the account earns 3% interest compounded annually?

3. If you wish to accumulate $50,000 in 10 years, how much must you deposit today in an account that pays annual interest rate of 8%, with semi-annual compounding of interest?

4. If you deposit 20,000 per year for 6 years in an account that pays an annual interest rate of 6%, what will your account be worth at the end of 6 years?

Answer 1

How much interest is earned in an account by the end of 5 years if $30,000 is deposited and interest is 4% per year, compounded semi-annually? Q1 Ans: We need to calculate future value Formula: = PV*(1+r/2)^n2 Where, PV = Present Value r= Interest rate n = Number of periods =$30000*(1+0.04/2)^5*2 $36,569.83 Therefore interest amount would be = $36569.83 - 30000 by =$6569.83

02) What is the balance in an account at the end of 10 years if $6,500 is deposited today and the account earns 3% interest compounded annually? We need to calculate future value Formula: = PV*(1+r)^n Where, PV = Present Value r= Interest rate n = Number of periods =$6500*(1+0.03)-10 $8,735.46

U SI so SD Q3) SE SF SG SH SK SL SM SN If you wish to accumulate $50,000 in 10 years, how much must you deposit today in an account that pays annual interest rate of 8%, with semi-annual compounding of interest? We need to calculate present value PV = FV * 1/(1+r/2)^n*2 Where, PV = Present Value r= Interest rate n = Number of periods FV = Future Value =$50000*1(1+0.08/2)^2*10 $ 22,819.35

Q4) If you deposit 20,000 per year for 6 years in an account that pays an annual interest rate of 6%, what will your account be worth at the end of 6 years? If Deposit Made At The End Of The Year FV = P * ((1+r)^n -1 )/ If Deposit Made At The Beginning Of The Year FV = P * ([1 + r)^n )/ Where, Where, P= Periodic Payment r= Interest rate n = Number of periods FV = Future Value P= Periodic Payment r= Interest rate n = Number of periods FV = Future Value =$20000*((1+0.06)^6-1] / 0.06 =$20000*((1+0.06)^6] / 0.06 $1,39,506.37 $ 1,47,876.75