The future value of $7,000 deposited today and compounded semiannually at an 9% annual interest rate for four years is
A) $9,955.
B) $9,520.
C) $8,100.
D) $7,920.

Question

Quizplus · Accepted Answer

The future value (FV) of an investment is calculated using the formula FV = PV(1 + r/n)^(nt), where PV is the present value, r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the time in years. Here, PV = $7,000, r = 9% or 0.09, n = 2 (since the interest is compounded semiannually), and t = 4 years. Plugging these values into the formula gives FV = $7,000(1 + 0.09/2)^(2*4) = $7,000(1.045)^8 ≈ $9,955.

The Future Value of $7,000 Deposited Today and Compounded Semiannually