Answer:
FV = $16126.99655 rounded off to $16127
Step-by-step explanation:
To calculate the future value of a sum of money, we simply multiply the present value by (1 + interest rate) for the period of time that we require the amount to be compounded. Thus, the formula for the future value of a sum of amount with annual compounding is,
FV = P * (1+i)^t
Where,
- FV is future value
- PV is present value
- i is the interest rate
- t is the period of time
For semi annual compounding, we simply divide the annual i by 2 and multiply the t by 2. So, Future value of an amount with semi annual compounding will be,
FV = P * (1 + i/2)^t*2
FV = 12000 * (1 + 0.06/2)^5*2
FV = 12000 * (1+0.03)^10
FV = $16126.99655 rounded off to $16127