Problema Solution
What is the present value of $73,000 in 11 years if the interest rate is 8% compounded semiannually? (Points : 2.5)
Answer provided by our tutors
A = the present value;
P = $73,000 is the principal value;
r = 0.08 or 8% interest rate;
m = 2 is the number of compounding periods per year;
t = 11 years;
i = r/m = 0.08/2 = 0.04 is the interest rate per period;
n = mt = 2*11 = 22 is the number of compounding periods;
A = P(1 + i)^n
A = 73000(1 + 0.04)^22
A = $173,004.072
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the amount after 11 years compounded semiannually is $173,004.072.