An investment of $7000 at 1% is compounded semiannually for three years. Find the future value and compound interest. Use the $1.00 future value table or the future value and compound interest formula.

An investment of $7000 at 1% is compounded semiannually for three years. Find the future value and compound interest. Use the $1.00 future value table or the future value and compound interest formula.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 6MC: You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years....

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

An investment of $7000 at 1% is compounded semiannually for three years. Find the future value and compound interest. Use the $1.00 future value table or the future
value and compound interest formula.

Expert Solution

Step 1

Formula for Future value:

FV = PV (1+R)ⁿ

PV = present value

R = rate of interest

n = number of periods, semi annually 3 years i.e. 6 periods

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Solved in 3 steps

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