The managers of a pension fund invested $4 million in government bonds paying 7.71% annual interest, compounded semiannually.After 3 years, what will the investment be worth? Round your answer to
The nearest thousand dollars.
A)$8.159 million
B)$6.169 million
C)$5.019 million
D)$6.019 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 ($4 million), r is the annual interest rate (0.0771), n is the number of times interest is compounded per year (2 for semiannually), and t is the number of years (3). Plugging in these values, FV = 4,000,000(1 + 0.0771/2)^(2*3) = 5,019,000, which rounds to $5.019 million.

The Managers of a Pension Fund Invested $4 Million in Government