Question

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7. Jim owns a 2-year term deposit of $3,000.00 with interest at 6.5% p.a. compounded semi- annually. Find its maturity value. a. $3609.42 b. $3409.43 c. $3568.54 d. $2856.35 8. Jackson has just invested $10,000. Find the accumulated value that this will grow to, if Jackson invested it for 6 months at an interest rate of 8% p.a., compounded quarterly.

Answer 1

1. Option (b) is correct

Here we need to find the future value. We will use the following formula:

FV = PV * (1 + r%)n

where, FV = Future value, PV = Present value = $3000, r = rate of interest = 6.5% compounded semi annually. So semi annual rate = 6.5% / 2 = 3.25%, n= time period = 2 * 2 = 4 semi annual periods

now, putting theses values in the above equation, we get,

FV = $3000 * (1 + 3.25%)4

FV = $3000 * (1 + 0.0325)4

FV = $3000 * (1.0325)4

FV = $3000 * 1.13647592816

FV = $3409.43

2.Here we need to find the future value. We will use the following formula:

FV = PV * (1 + r%)n

where, FV = Future value, PV = Present value = $10000, r = rate of interest = 8% compounded quarterly. So quarterly rate = 8% / 4 = 2%, n= time period = 2 quarters

now, putting theses values in the above equation, we get,

FV = $10000 * (1 + 2%)2

FV = $10000 * (1 + 0.02)2

FV = $10000 * (1.02)2

FV = $10000 * 1.0404

FV = $10404

So, accumulated value is $10404.