The managers of a pension fund invested $5 million in government bonds paying 6.83% annual interest, compounded semiannually.After 3 years, what will the investment be worth? Round your answer to
The nearest thousand dollars.
A)$7.266 million
B)$6.116 million
C)$7.116 million
D)$9.256 million
E)none of the above

Question

Quizplus · Accepted Answer

The future value of the investment can be calculated using the formula for compound interest: FV = P(1 + r/n)^(nt), where P is the principal amount ($5 million), r is the annual interest rate (0.0683), n is the number of times interest is compounded per year (2 for semiannual), and t is the number of years (3). Plugging in these values, FV = 5,000,000(1 + 0.0683/2)^(2*3) = $6,116,000, which rounds to $6.116 million.

The Managers of a Pension Fund Invested $5 Million in Government