Nicola invested a lump sum of $75,000 now along with $150 per month for 15 years. Determine the future value if the rate of interest is 8% compounded semi-annually.

Question

Quizplus · Accepted Answer

The correct answer is A because the future value of the investment is $294,566.12. This is calculated using the formula for the future value of an annuity, which is:FV = P * ((1 + r/n)^(n*t) - 1) / (r/n)where:P is the principal investmentr is the annual interest raten is the number of times per year that the interest is compoundedt is the number of yearsIn this case, P = $75,000, r = 8%, n = 2 (since the interest is compounded semi-annually), and t = 15. Plugging these values into the formula, we get:FV = $75,000 * ((1 + 0.08/2)^(2*15) - 1) / (0.08/2)= $75,000 * ((1.04)^30 - 1) / 0.04= $75,000 * (2.19456612 - 1) / 0.04= $75,000 * 1.19456612 / 0.04= $294,566.12

Nicola Invested a Lump Sum of $75,000 Now Along with $150