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15 April, 10:59

Nick inherited $150,000, which he immediately invested into a fund that will earn 10% per annum. if interest is compounded semi-annually, in five years the investment will grow to

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  1. 15 April, 11:10
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    First calculate the effective interest rate because the problem says that the interest is compounded semi-annually. The formula for effective interest rate is ieff = [ (1+i/n) ^n] - 1. The calculated effective interest rate is 10.25%. The value of the investment in 5 years could be calculated using the equation, FV = PV (1+i) ^n. The value of the investment then would be $244,334.194.
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