Question

E). You have just accepted a job offer, which came with a signing bonus of $5,000 to be paid today in your retirement account. Your employer will also contribute an extra $10,000 at the end of each full year (you start work tomorrow!). If this account is expected to earn 10% p.a. compounded semi-annually, which number is closest to the amount of money will you have in that account after five years? (including the payment for that year). A) $59,500 B) $65,500 C) $69,500 D) $72,500 E) None of the above اما المنادى المنام امام حسن امامممممممممممممامند PARA O

Answer 1

Amount of deposits = $5,000 today and $10,000 at the end of each full year Term = 5 Years Interest rate = 10% Compounded semi annually Effective annual interest rate = [1 +I/n]'n - 1 = [1 + 10%/2 ]^2 - 1 = 1.1025 - 1 = 0.1025 = 10.25% Future value = $5,000 *(1+1) n + $10,000 * [(1+1) 'n - 1]/I Future value = $5,000 *(1 + 10.25%)^5 + $10,000 *[(1 + 10.25%) 5 - 1]/10.25% = $5,000 * 1.6288946 + $10,000 * 6.1355573 = $8,144.4731 + $61,355,573 = $69.500.046 = $69,500 (Rounded) Ans: Future value = $69,500 - Option-C