Rework number 2-use quarterly compounding. Show work

2. calculating future values In this exercise, we are essentially measuring the effect of compound interest. That is, given a sum today (PV), an interest rate (1/Y), and a length of time (N), what effect will interest compounding have? In other words, how much will our money increase if invested at a certain rate for a certain period of time? Below are the solutions calculated two ways: first algebraically and second using calculator (BAII plus) keystrokes. FV = (2960)(1.13)7= 6963.71 PV = -2960; I/Y = 13; N = 7; CPT FV = 6963.71 FV = (7846)(1.07)16 = 23162.68 PV = -7846; I/Y =7; N = 16; CPT FV = 23162.68 FV = (85381)(1.09)19 = 439000.18 PV = -85381; 1/Y = 9; N = 19; CPT FV = 439000.18 FV = (221614)(1.05)26 = 787986.85 PV =-221614; I/Y = 5; N = 26; CPT FV = 787986.85 In problem 2 above, annual compounding of interest was assumed. Now, let's rework the examples assuming semi- annual compounding. Semi-annual compounding simply means that, at the end of 1/ year, all of the interest earned up to that point begins to earn interest itself. Note that, in the future value calculations, the rate is divided by two and the number of periods is doubled. semi-annual compounding FV = (2960)(1.065) 4 =7148.03 PV = -2960; I/Y = 6.5; N = 14; CPT FV = 7148.03 FV = (7846)(1.035)32 = 23590.63 PV = -7846; I/Y = 3.5; N = 32; CPT FV = 23590.63 FV = (85381)(1.045)= 454757.92 PV = -85381; 1/Y = 4.5; N = 38; CPT FV = 454757.92 FV = (221614)(1.025) = 800273.05 PV = -221614; I/Y = 2.5; N = 52; CPT FV = 800273.05