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11 October, 23:52

To what amount will the investment grow in 4 years? To what amount would the investment grow in 4 years if the fund earns 8% annual interest compounded semiannually? (Round factor values to 5 decimal places, e. g. 1.25124 and final answers to 0 decimal places, e. g. 458,581.)

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  1. 12 October, 02:08
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    Instructions are listed below.

    Explanation:

    We weren't provided with enough information to answer the requirements. But, I will give the formulas for different situations and a small example to guide an answer.

    There are two different ways to invest in order to reach the desired goal. One is a lump sum amount and others are timely deposits (annual, semiannual, quarterly, etc).

    Lump-sum:

    To calculate the final value, we need to use the following formula:

    FV = PV * (1+i) ^n

    For example, imagine a lump sum deposit of $5,000 for 5 years at an interest rate of 8% compounded annually:

    FV = 5,000 * (1.08^5) = $7,346.64

    Now, if the interest rate is semiannually.

    n = 2*5=10

    i = 0.08/2 = 0.04

    FV = 5,000 * (1.04^10) = $7,401.22

    Timely deposit:

    FV = {A*[ (1+i) ^n-1]}/i

    A = annual deposit

    For example, imagine an annual deposit of $1,000 for 5 years at an interest rate of 8% compounded annually:

    FV = {1,000*[ (1.08^5) - 1]} / 0.08 = $5,866.60
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