Calculate the maturity value of a two-year, $20,000 Guaranteed Investment Certificate accumulating at 5% compounded semi-annually.
A) $18,119
B) $20,000
C) $22,076
D) $23,612
E) $24,310

Question

Quizplus · Accepted Answer

The maturity value of an investment can be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount (the initial amount of money), r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years. For this problem, P = $20,000, r = 5% or 0.05, n = 2 (since interest is compounded semi-annually), and t = 2 years. Plugging these values into the formula gives A = $20,000(1 + 0.05/2)^(2*2) = $20,000(1.025)^4 ≈ $22,076.

Calculate the Maturity Value of a Two-Year, $20,000 Guaranteed Investment