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. Kingston inherited $140,000 from an aunt. If Kingston decides not to spend his inheritance but to leave the money in his savings account until he retires in 15 years, how much money will he have assuming an annual interest rate of 8%, compounded semiannually to the closest answer given?
A) $ 308,000
B) $ 509,880
C) $ 454,076
D) $7,851,900

Question

Quizplus · Accepted Answer

The future value of the inheritance can be calculated using the formula for compound interest: FV = P(1 + r/n)^(nt). Here, P = $140,000, r = 0.08, n = 2 (since interest is compounded semiannually), and t = 15. Plugging in these values gives the future value closest to $454,076.

The Solution to This Problem Requires Time Value of Money