Question 4 Ali has decided to invest $100 in a savings account paying 6% interest compounded...

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Answer 1

Answer #1

Future Value

= Present Value x ( 1 + Rate of interest) ^ Number of periods

When interest is compounded semiannually, interest rate is divided by 2 and time period is multiplied by 2

So, Present Value = $100

Rate of interest = 6 / 2 = 3% or 0.03

Number of periods = 2 x 2 = 4 semi-annual periods

So, Future Value

= $100 x ( 1.03 ^ 4)

= $100 x 1.1255

= $112.55

Answer 2

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