Find the present value of $10,000 if interest is paid at a rate of 9% per year, compounded semiannually , for 3 years .

Question

Also looking on how to get the compounded semiannually

Answer 1

Hi Marie.

For this problem it would be best to use a variation of the compound interest formula where you would find the present value (P) since they have given you the future value (A), I believe.

So it would look like P = A / (1+r/n)^nt

A=10000, r=0.09, n=2 (because it says semiannually) and t=3

Therefore, you can input it in the calculator (you may have to add additional parentheses based on your calculator) like 10000 / (1+0.09/2)^2*3.

The answer should be about $7678.96 or $7679 depending on how the problem asks you to round.

I hope this helps you understand this particular problem.

Sincerely,

Shaniqua