Question

An investment pays 10% interest per year, compounded semi-annually. Find the maturity value of an initial deposit of $7,500

after 6 years.

$11,348.72
$14,871.25
$13,468.92
$12,098.21

Answer 1

The maturity value after 6 years is $13,468.92

Explanation:

We can use an exponential function to answer this.

we have: f(x) = a(1+r)^x, a = initial value, R = rate, x = time

semi-compounded 10% = 10.25%

f(6) = 7,500(1.1025)^6

f(6) = 7,500*1.79585632602

f(6) = 13468.9224452

f(6) = $13,468.92.

The maturity value after 6 years is $13,468.92

Hope this helps!