Question

The future value of $200 received today and deposited at 8 percent compounded semiannually for three years is ________. $380 $158 $253 $252

Answer 1

Answer:

$253

Explanation:

In order to solve this you just have to use the formula to calculate the future insterests:

$A=P(1+\frac{r}{n})^{nt}$

A= Amount or future value

P=Principal

R=Interest rate in decimals

N= Number of compounds by unit, or year

T= Time in years

So we know that the interest is 8% that is 0.08 in decimal, and since it is compounded semiannually that´s two times a year for three years, we just insert that into the formula:

$A=P(1+\frac{r}{n})^{nt}\\A=200(1+\frac{.08}{2})^{2*3}\\ A=200(1.04)^6\\a=200(1.2653)\\A=253.06$

So the future value of the $200 account will be $253.06 after three years.

Answer 2

The correct answer is $253