Question

What present value (P) amount will grow to $280,000 if it is invested at 6% compounded semiannually for 13 years (rounded to the nearest cent)?

A) $118,916.46
B) $150,000.00
C) $282,465.79
D) $500,000.00

Answer 1

To find the present value (P) amount that will grow to $280,000 if it is invested at 6% compounded semiannually for 13 years, use the formula for compound interest.

Step-by-step explanation:

To find the present value (P) amount that will grow to $280,000 if it is invested at 6% compounded semiannually for 13 years, we can use the formula for compound interest:

P = F / (1 + r/n)^(n*t)

Where P is the present value, F is the future value, r is the interest rate, n is the number of compounding periods per year, and t is the number of years.

Plugging in the given values:

P = 280,000 / (1 + 0.06/2)^(2*13)

P ≈ $118,916.46