be carful guys, this test is completely important. also there might be tricky qu

Question

be carful guys, this test is completely important. also there might be tricky questions. read it carefully

Find either the future value or present value for compounded interest.cite the answor. (Spts) Write the correct formula, fill in the formula, use your calculator and 14) You just put $20,000 in a savings account that is expected to earn write the answer. (5pts) compounded semiannually. How much is in our savings account after 30 years? 20 years. How much money should be invested now at a 5%, compounded quarterly, to provide $120,000 in 20 years? 15) The average cost of a 4-year college education is projected to be $120,000 in ohnson fal

Explanation / Answer

(14)

Number of compounding periods per year = 2

Total number of compounding periods = 2 x 30 = 60

Amount in savings account after 30 years = Initial saving x [1 + (R / 2)]2N

= $20,000 x [1 + (0.05 / 2)]60

= $20,000 x (1.025)60

= $20,000 x 4.3998

= $87,996

(15)

Frequency of compounding = 4 per year

Number of compounding periods = 4 x 20 = 80

If initial investment = M, then

$120,000 = M x [1 + (0.085 / 4)]80

= M x (1.02125)80

= M x 5.3773

M = $120,000 / 5.3773 = $22,316.03

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