solve the problem

Question

What initial investment at 9% compounded semiannually for 3 years will accumulate to $12,000

Answer 1

It's a compound interest problem. Variables:

 

PV = present value (what you want to find, the investment)

FV = future value (what you end up with)

i = the interest rate, as a decimal

N = the number of times the interest is compounded

 

FV = PV (1 + i)^N

so PV = FV (1 + i)^(-N) = 12000 (1.09^(-6)) = about $7155 and change

 

Sanity check: Let PV = 7155 and calculate FV. See if you get 12000. Cheers!