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Find the accumulated value of an investment of $10,000 for 7 years at an interest rate of 4.5% if the money is a. compounded semiannually; b. compoundedquarterly: C. compounded monthly; d. compounded continuously

User Dgrat
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1 Answer

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We would apply the formula for finding compound interest which is expressed as

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

Where

A is the final amount after t years

P is the initial amount or capital

t is the number of years

n is the number of compounding

r is the interest rate

From the information given,

p = 10000

t = 7

r = 4.5/100 = 0.045

a) for semiannual compounding, n = 2(twice a year)

Thus,

A = 10000(1 + 0.045/2)^2 * 7

A = 13654.83

b) for quarter compounding, n = 4(there are 4 quarters in a year)

Thus,

A = 10000(1 + 0.045/4)^4 * 7

A = 13678.52

c) for monthly compounding, n = 12(there are 12 months in a year)

Thus,

A = 10000(1 + 0.045/12)^12 * 7

A = 13694.52

d) For continuous compounding, the formula is

A = pe^rt

A = 10000 * e^(0.045 * 7)

A = 13702.59

User Yngvar Kristiansen
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