Question

Mr Rolf Weasley has recently purchased $12,000 worth of shares in Perloins Ltd. Given

the relative risk exposure of Perloins Ltd., Rolf expects an annual rate of return on the
investment of 9% p.a. compounded at regular intervals of 4 months. Approximately how
much would Rolf expect to realise from the sale of his investment in 5 years from now?

Answer 1

$18,695.61

Step-by-step explanation:

The future value is calculated using the formula

Fv= PV(1 + i)^n

where Fv = Future value

Pv= present value: $12,000

i= interest rate : 9% or 0.09 per year: 4 months interests =0.09/12 x4 =0.03

n= 5 years: number of periods = 5 x 3 (12/4) periods = 15

Fv= $12,000 ( 1 + 0.03)^15

Fv= $12,000 x 1.5579674

Fv =$18,695.6089

Fv=$18,695.61