You just received a bonus of $3, 000. a. calculate the future value of $3.000 gi

Question

You just received a bonus of $3, 000. a. calculate the future value of $3.000 given that it will be held in the bank for 6 years and earn an annual interest rate of 3 percent b. Recalculate part(a) using a compounding period that is (1) semi-annual and (2) bimonthly. c. Recalculate part(a) and (b) using an annual interest rate of 6 percent. d. Recalculate part(a) using a time horizon of 12 years at an annual interest rate of 3 percent e. what conclusions can you draw when you compare the answer in parts (c) and (d) with the answer in parts (a) and (b)? a. what is the future value of $3.000 in a tank account for 6 years at an annual interest rate of 3 percent?

Explanation / Answer

a. FV = $3,000 x (1.03)^6 = $3,582

b. 1. FV = $3,000 x (1 + 3%/2)^(6x2) = $3,000 x (1.015)^12 = $3,587

2. FV = $3,000 x (1 + 3%/6)^(6x6) = $3,000 x (1.005)^36 = $3,590

c. 1. FV = $3,000 x (1.06)^6 = $4,256

2. FV = $3,000 x (1 + 6%/2)^(6x2) = $3,000 x (1.03)^12 = $4,277

3. FV = $3,000 x (1 + 6%/6)^(6x6) = $3,000 x (1.01)^36 = $4,292

d. FV = $3,000 x (1.03)^12 = $4,277

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