Question

The future value of an investment is $10,110.28. If money was originally invested at 3.5% compounded semi-annually for 5 years, what was the amount of the original investment?

a) $9,500
b) $9,800
c) $10,000
d) $10,200

Answer 1

Option (b), To find the original investment, we use the formula for compound interest: P = A/(1+r/n)^(nt). In this case, the original investment was $9,800.

Step-by-step explanation:

To find the original investment, we need to use the formula for compound interest:

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

Where:

• P = original investment
• A = future value
• r = annual interest rate
• n = number of compounding periods per year
• t = number of years

In this case, P = A/(1+r/n)^(nt), P = 10,110.28/(1+0.035/2)^(2*5), P ≈ 9,800

Therefore, the amount of the original investment was $9,800. Hence, option b) $9,800 is the correct answer.