Question

9. For Investment Plan A to C, solve for the future value at the end of the term based on the
information provided.
Investment Plan Principal
A
$7,500
B
$53,000
C
$19,000
Interest Rate
8% compounded quarterly
6% compounded monthly
5.75% compounded semi-annually
Term
3 years
4
years and 3 months
6 years and 6 months

Answer 1

The future value of Investment A is 9511.81

The future value of Investment B is 68,351.02

The future value of Investment C is29.067.07.

What are the future values?

When an amount earns a compound interest, it means that both the amount invested and the interest rate already accrued increases in value at the next compounding date. For example, if interest is compounded quarterly, both the amount invested and the interest accrued increases every quarter.

The formula for calculating future value:

FV = P (1 + r)^nm

• FV = Future value
• P = Present value
• R = interest rate
• m = number of compounding
• N = number of years

Investment A = 7500 x [(1 + (0.08/4)]^(4 x 3) = 9511.81

Investment B = 53,000 x [(1 + (0.06/12)]^[(4 x 12) + 3) = 68,351.02

Investment C = 19,000 x [(1 + (0.0575/2)]^{6 x 2) + 6/2) = 29.067.07

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