Question

What is the future value of $500 in 22 years assuming an interest rate of 13 percent APR, compounded semiannually?

rev: 09_17_2012

Multiple Choice

• $7,356.92

• $7,986.43

• $7,587.11

• $751.61

• $640.37

Answer 1

Question Summary : future value of $500 in 22 years assuming an interest rate of 13 percent APR, compounded semiannually

Solution : Option2 $7,986.43

Formula for future value of Investment =

FV= PV ( 1+ i/t ) ^ n*t

where PV is the present value = $ 500

i = interest rate = 13%

t = number of times interest is compunded = semiannualy= 2

n = number of years = 22 years

FV = 500 ( 1+ 0.13 / 2 ) ^ 22* 2

= 500 * (1.065) ^ 44

= 500 * 15.9729

=$ 7986.45 ( decimal difference due to rounding off)