Answer:
The value of this investment in two years' time is $8,725.44
Explanation:
The problem we are faced with is in deciding the worth of such investment in two years' time, that is future value of the investment,hence the future value formula below comes handy:
FV=PV*(1+r/t)^N*t
PV is the present of the investment today at $7,900
r is the rate of return of 0.0500 annually, but 0.0125 (0.0500/4) quarterly.
t is the number of times interest is paid yearly, 4 times in this instance.
N is the number of years the investment lasts, which is years.
FV=$7,900*(1+0.0125)^2*4
FV=$7,900*(1.0125)^8
FV=$8725.440
The investment's worth in two years is $8725.44
