In order to compare investments, analysts will convert monthly, quarterly, semi-annual rates to annual rates. If an investment of $100,000 is invested at 4.5% twice a year compounded semi-annually, the growth can be modeled by the equation A(t)=100,000(1.045)2t. What is the equivalent annual growth rate for this investment (rounded to the nearest tenth of a percent) and what is it worth (rounded to the nearest whole dollar) after 15 years?

a. 2.2%, and $139,114

c. 9.2% and $374,532

Guest Jan 16, 2019

#1**0 **

The equivalent annual growth rate would be

wait a minute....this makes me a bit confused: $100,000 is invested at 4.5% twice a year compounded semi-annually(

(I think this means you get 4.5% added to your investment each 6 months....yah? I think this would be the same as 9% compounded semi)

Assuming you have the correct equation, at the end of ONE year

A = 100000(1.045)^2 = 109202.5 which is 9.2% growth per year

At 15 years A = 100000(1.045)^2(15) = $374531.81 ~$ 374,532

ElectricPavlov Jan 16, 2019