David Spear invested $14,000 today in a fund that earns 10% compounded annually. Click here to view factor tablesTo what amount will the investment grow in 4 years? To what amount would the investment grow in 4 years if the fund earns 10% annual interest compounded semiannually?

Answer

given,

compounded annually

Present Value (PV) = $14,000

rate = 10%

time = 4 years

Future value = ?

F V = P V x (1 + i) ⁿ

F V = $14,000 x (1 + 0.1) ⁴

F V = $14,000 x 1.4641

F V = $ 20,497.4

compounded semiannually

Present Value (PV) = $14,000

rate = 5%

time = 8

Future value = ?

F V = P V x (1 + i) ⁿ

F V = $14,000 x (1 + 0.05) ⁸

F V = $14,000 x 1.4775

F V = $ 20,684.37