a.We use the formula:
A=P(1+r/12)^12n
where
A=future value
P=present value
r=rate of interest
n=time period.
500,000=P*(1+0.05/12)^(12*7)
P=500,000/(1+0.05/12)^(12*7)
=500,000*0.705200688
=$352600.34(Approx)
b.We use the formula:
A=P(e)^rn
where
A=future value
P=present value
r=rate of interest
n=time period.
e=2.71828
500,000=P*(2.71828)^(0.05*7)
500,000=P*1.41906721
P=500,000/1.41906721
=$352344.13(Approx)
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