Question

Practice Time Value of Money Problems 1. How much will be in an account at the end of 5 years if you deposit $10,000 today at 8.7% annual interest, compounded semi-annually?

Answer 1

Interest rate = 8.7% annual

Interest rate (i) = 8.7/2

= 4.35% semi annual

Time period (n) = 5 years

= 5 x 2

= 10 half years

Amount deposited = $10,000

Amount after 5 years = Amount deposited x (1 + i)ⁿ

= 10,000 x (1 + 0.0435)¹⁰

= 10,000 x (1.0435)¹⁰

= 10,000 x 1.5308

= $15,308 (rounded to nearest whole dollar)

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