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Chapter 6: Question 1BE (page 302)

Chris Spear invested $15,000 today in a fund that earns 8% compounded annually. To what amount will the investment grow in 3 years? To what amount would the investment grow in 3 years if the fund earns 8% annual interest compounded semiannually?

Short Answer

Expert verified

The investment will grow to $18,896 in 3 years, and if the investment earns 8% interest compounded semi-annually, the investment will grow to $18,980

Step by step solution

01

Calculation of investment growth in 3 years

FV=PV(FVFn,i)=15,000×(1.25971)=$18,896

02

Calculation of investment growth in 3 years if the fund earns 8% interest compounded semi-annually

FV=PV(FVFn,i)=15,000×(1.26532)=18,980

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Most popular questions from this chapter

Amy Monroe wants to create a fund today that will enable her to withdraw $25,000 per year for 8 years, with the first withdrawal to take place 5 years from today. If the fund earns 8% interest, how much must Amy invest today?

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