Angie invested £100,000 she received from her grandmother today in a fund that is expected to earn 10% per annum. To what amount should the investment grow in five years if interest is compounded semi-annually?

Question

Quizplus · Accepted Answer

The interest rate is 10% per annum, compounded semi-annually. This means that Angie’s investment will earn 5% (10%/2) every six months. Therefore, after one year, her investment will grow to £100,000 × 1.05² = £110,250.
After 5 years, the investment will have grown to £100,000 × (1.05)^(2×5) = £162,889.46, which is closest to answer choice C (£162,890).

Angie Invested £100,000 She Received from Her Grandmother Today in a Fund