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What is the difference in the future value of $100 at 7 percent interest for 5 years if the interest is compounded semiannually rather than annually?

Respuesta :

Answer:

0.80

Explanation:

  • Compounded interest annually

[tex]I=P[(1+r)^n-1]\\I=100[(1+0.07)^5-1]\\\\I=100[1.40255173-1]\\I=100[.40255173]\\I=40.255173[/tex]

  • Compounded interest Semiannually

[tex]I=P[(1+r)^n-1]\\I=100[(1+0.035)^{10}-1]\\\\I=100[1.41059876-1]\\I=100[.41059876]\\I=41.059876[/tex]

Difference between interest = 41.059876 - 40.255173

Difference between interest = 0.804703

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