Question

Assume that Commonwealth Edison Company deposited $250 million in an escrow account with Northern Trust Company at the beginning of 2017 as a commitment toward a power plant to be completed December 31, 2020. How much will the company have on deposit at the end of 4 years if interest is 10%, compounded semiannually

Answer 1

Answer: $369,365,000

Step-by-step explanation:

Ti calculate the future value if the company goes thus:

Amount deposited = $250 million

Annual interest rate = 10%

Semiannual interest rate = 5%

Semiannual Period = 4 years =4×2 = 8

Future Value will then be:

= $250 million × FV of $1 (5%, 8)

= $250 million × 1.47746

= $369,365,000