Ask Question
21 June, 20:27

The managers of a pension fund have invested $2.5 million in U. S. government certificates of deposit (CDs) that pay interest at the rate of 2.1%/year compounded semiannually over a period of 20 years. At the end of this period, how much will the investment be worth? (Round your answer to four decimal places.)

+2
Answers (1)
  1. 22 June, 00:05
    0
    The answer is $3.8 million

    Explanation:

    The payment is semiannual i. e it will be paid twice in a year.

    Present value (PV) = $2.5 million

    Interest rate = 1.05% (2.1% : 2)

    Number of periods = 40 years (20 years x 2)

    The formula is FV = PV (1 + r) ^n

    = $2.5 million (1 + 0.0105) ^40

    = $2.5 million (1.0105) ^40

    = $2.5 million x 1.5186

    = $3.8 million

    The Investment will therefore worth $3.8 million at the end of the period.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “The managers of a pension fund have invested $2.5 million in U. S. government certificates of deposit (CDs) that pay interest at the rate ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers