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Louisa invested $4,500 at 4% interest compounded semiannually for two years.  Calculate the future value of Louisa's investment using Exhibit 11-1 or the formula FV = P(1 + R)n.

Louisa invested $4,500 at 4% interest compounded semiannually for two years.  Calculate the future value of Louisa's investment using Exhibit 11-1 or the formula FV = P(1 + R)n.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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 Louisa invested $4,500 at 4% interest compounded semiannually for two years.  Calculate the future value of Louisa's investment using Exhibit 11-1 or the formula FV = P(1 + R)n.

THE VALUE OF COMPOUND INTEREST The growth of an investment may vary greatly depending on whether simple or compound interest is involved. For example, the chart below shows the growth of $1,000 invested in an account paying 10% annual simple interest versus the same amount invested in an account paying 10% annual compound interest. As this chart shows, compound interest yields more than four times the value generated by simple interest over 30 years. Simple Interest $1,500 $1,100 $3,000 $2,000 $4,000 1 5 10 20 30 year years years years years Compound Interest $17,449.40 $1,100 $1,610.51 $6,727.50 $2,593.74 1 5 10 20 30 year years years years years
Transcribed Image Text:THE VALUE OF COMPOUND INTEREST The growth of an investment may vary greatly depending on whether simple or compound interest is involved. For example, the chart below shows the growth of $1,000 invested in an account paying 10% annual simple interest versus the same amount invested in an account paying 10% annual compound interest. As this chart shows, compound interest yields more than four times the value generated by simple interest over 30 years. Simple Interest $1,500 $1,100 $3,000 $2,000 $4,000 1 5 10 20 30 year years years years years Compound Interest $17,449.40 $1,100 $1,610.51 $6,727.50 $2,593.74 1 5 10 20 30 year years years years years
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