Question
If you invest $300.00 at a rate of 13.90% per annum compounded semi-annually, by how many times will your investment increase over 5 years?
a. 1.57 times
C. 2.35 times
b. 1.96 times
d. 3.03 times
a. 1.57 times
C. 2.35 times
b. 1.96 times
d. 3.03 times
Answers
GPT 3.5
To find out how many times your investment will increase over 5 years, we need to use the compound interest formula:
A = P(1 + r/n)^(nt)
Where:
A = the final amount
P = the principal amount (initial investment)
r = annual interest rate (as a decimal)
n = the number of times that interest is compounded per year
t = the number of years
In this case, P = $300, r = 13.90% = 0.139, n = 2 (semi-annual compounding), and t = 5.
Plugging in the values:
A = 300(1 + 0.139/2)^(2*5)
A = 300(1 + 0.0695)^10
A = 300(1.0695)^10
A ≈ 300(1.877368991)
A ≈ $563.21
The investment will increase to approximately $563.21 after 5 years.
To find out how many times the investment increased, we divide the final amount by the initial investment:
Times = A / P
Times = 563.21 / 300
Times ≈ 1.88 times
Therefore, the correct answer is not listed among the options given.
A = P(1 + r/n)^(nt)
Where:
A = the final amount
P = the principal amount (initial investment)
r = annual interest rate (as a decimal)
n = the number of times that interest is compounded per year
t = the number of years
In this case, P = $300, r = 13.90% = 0.139, n = 2 (semi-annual compounding), and t = 5.
Plugging in the values:
A = 300(1 + 0.139/2)^(2*5)
A = 300(1 + 0.0695)^10
A = 300(1.0695)^10
A ≈ 300(1.877368991)
A ≈ $563.21
The investment will increase to approximately $563.21 after 5 years.
To find out how many times the investment increased, we divide the final amount by the initial investment:
Times = A / P
Times = 563.21 / 300
Times ≈ 1.88 times
Therefore, the correct answer is not listed among the options given.