The managers of a pension fund invested $2 million in government bonds paying 8.52% annual interest, compounded semiannually.After 4 years, what will the investment be worth? Round your answer to
The nearest thousand dollars.
A)$2.792 million
B)$3.942 million
C)$5.932 million
D)$3.792 million
E)none of the above

Question

Quizplus · Accepted Answer

The future value of the investment can be calculated using the formula for compound interest: FV = P(1 + r/n)^(nt), where P is the principal amount ($2 million), r is the annual interest rate (0.0852), n is the number of times interest is compounded per year (2), and t is the number of years (4). Plugging in the values, FV = 2,000,000(1 + 0.0852/2)^(2*4) = $2,792,000, which rounds to $2.792 million.

The Managers of a Pension Fund Invested $2 Million in Government