The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Ashley inherited $140,000 from an aunt.If Ashley decides not to spend her inheritance but to leave the money in her savings account until she retires in 15 years,how much money will she have assuming an annual interest rate of 8%,compounded semiannually?

Question

Quizplus · Accepted Answer

To calculate the future value of Ashley's inheritance after 15 years, we can use the compound interest formula:

FV = PV*(1 + r/n)^(n*t)

Where FV is the future value, PV is the present value (inheritance amount), r is the annual interest rate (8%), n is the number of times interest is compounded per year (2 for semiannually), and t is the number of years (15).

Plugging in the values, we get:

FV = $140,000*(1 + 0.08/2)^(2*15)
FV = $454,020

Therefore, Ashley will have $454,020 in her savings account after 15 years if she leaves her inheritance and earns an annual interest rate of 8%, compounded semiannually.

The best choice is C as it is the correct calculation using the compound interest formula with the given information.

The Solution to This Problem Requires Time Value of Money