You invest $50,000 today in a fund earning j₄ = 12%.How much have you accumulated 65 months later using the practical method?

Question

Quizplus · Accepted Answer

Using the practical method, we need to first calculate the effective annual rate (EAR):

EAR = (1 + 0.12/12)^12 - 1
EAR = 0.1268 or 12.68%

Then, we can use the formula for future value of an investment:

FV = PV x (1 + r)^n
FV = $50,000 x (1 + 0.1268)^(65/12)
FV = $94,875.18

Therefore, the answer is D, $94,875.

You Invest $50,000 Today in a Fund Earning J4 =