You expect to receive R1,000 at the end of each of the next 3 years.You will deposit these payments into an account which pays 10 percent compounded semi-annually.What is the future value of these payments, that is, the value at the end of the third year?

Question

Quizplus · Accepted Answer

We can use the formula:

FV = PMT[(1 + r/2)^n - 1]/(r/2)

Where:

PMT = R1,000 (The annual payments)
r = 10% (The annual interest rate)
n = 3 (The number of years)

Plugging in the values, we get:

FV = 1000[(1 + 0.1/2)^6 - 1]/(0.1/2)
FV = R3,317.53

So the closest answer is C: R3,318.

You Expect to Receive R1,000 at the End of Each