The future value of a $500 investment today at 10 percent annual interest compounded semiannually for 5 years is

Question

Quizplus · Accepted Answer

First, we need to find the semiannual interest rate, which is 10% divided by 2, or 5%. 
Next, we need to find the total number of compounding periods, which is 5 years times 2, or 10 periods. 
Using the formula for future value of a lump sum, FV = PV x (1 + r)^n, where PV is the present value, r is the interest rate per period, and n is the total number of periods, we can calculate the future value as follows: 
FV = $500 x (1 + 0.05)^10 = $812.50 (rounded to the nearest cent) 
Therefore, the best choice is B, $814, which is the closest answer choice to our calculated future value.

The Future Value of a $500 Investment Today at 10