Find the future value of the ordinary annuity. Interest is compounded annually, unless otherwise indicated.
-PMT = $7,500, i = 3% interest compounded semiannually for 3 years
A) $46,721.63
B) $38,642.00
C) $546,721.63
D) $265,225.00

Question

Quizplus · Accepted Answer

First, we need to calculate the semiannual interest rate: 
i = 3% / 2 = 1.5% 
Next, we need to calculate the number of compounding periods: 
n = 3 years x 2 = 6 semesters 
Using the formula for the future value of an ordinary annuity: 
FV = PMT x ((1 + i)^n - 1) / i 
FV = $7,500 x ((1 + 0.015)^6 - 1) / 0.015 
FV = $46,721.63 
Therefore, the best choice is A.

Find the Future Value of the Ordinary Annuity