Question

What sum of money today is equivalent to $8,250 2 years from now, if annual interest rate is 4%, compounding semi-annually?

Answer 1

$7,621.72

Step-by-step explanation:

The equation that describes the future value (FV) of an investment (P) at an interest rate (r) for a period of n years, compounded semi-annually is:

`FV = P*(1+(r)/(2))^(2n)`

The amount required to yield $8,250 after 2 years at a rate of 4% per year is:

`8,250 = P*(1+(0.04)/(2))^(2*2) \\P=\$7,621.72`