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15 August, 16:27

David Spear invested $14,000 today in a fund that earns 10% compounded annually. Click here to view factor tables To what amount will the investment grow in 4 years? To what amount would the investment grow in 4 years if the fund earns 10% annual interest compounded semiannually? (Round factor values to 5 decimal places, e. g. 1.25124 and final answers to 0 decimal places, e. g. 458,581.) Investment at 10% annual interest $enter a dollar amount rounded to 0 decimal places Investment at 10% annual interest, compounded semiannually $enter a dollar amount rounded to 0 decimal places eTextbook and Media

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  1. 15 August, 16:37
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    The investment will grow to $20,497 in four years if interest is compounded annually.

    On other hand, the investment will grow to $20,684 if interest is compounded at 10% semi-annually

    Explanation:

    Using compound interest formula below the, the total investment after four years:

    A=P (1+r/n) ^nt

    A=Future value

    P=Principal amount invested

    n=number of time interest is paid per time period

    t=number of time period

    First question:

    P=$14000

    r=10%

    n=4 years

    t=1 period

    A=$14000 * (1+0.1) ^4

    A=$20497.4

    Second question

    P=$14000

    r=10%

    n=4years

    t=2 times

    A=$14000 * (1+0.1/2) ^4*2

    A=$20684.38

    In short, the investment grows better if the interest is compounded at 10% semi-annually.
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