Question

Find the interest earned and the future value of an annuity with semiannual payments of $1,500 for 16 years into an account that pays 9% interest per year compounded semiannually.

Answer 1

interest earned= 1853.98

the future value of an annuity= 2453.98

Explanation:

Given Data:

Interest rate= 9%

time,t = 16 years

Semi-Annual payment, P= 600

n= 2 as Semi-Annual

At the end of 16 years, final investment A= ?

As per the interest formula for compounded interest

A= P(1+r/n)^nt

Putting the values in above equation

= 600(1+0.09/2)^32

= 2453.98

Interest earned = A-P

= 2453.98-600

= 1853.98 !