An investment is advertised as returning 3.7% every 6 months (semiannually), compounded semiannually. if $50,000 is invested, the growth can be modeled by the equation a(t) = 50,000(1.037)2t.
what is the equivalent annual growth rate for this investment (rounded to the nearest hundredth of a percent) and what is it worth (rounded to the nearest thousand dollar) after 25 years?
8.50% and $308,0007.54% and $308,0007.44% and $298,00022.22% and $96,000

7.54% and $308,000

Explanation:

Part 1 : Since, the amount formula in compound interest,

Where,

P = principal value,

r = annual rate,

n = number of compounding periods in a year,

t = number of years,

If P = $ 50,000, n = 1,

Suppose this amount is equivalent if and n = 2,

Then

Hence, the equivalent annual growth rate for this investment would be 7.54%.

Part 2 :

If t = 25,

( Using calculator )

i.e. it would be worth $ 308,000( approx) after 25 years.

d. the economy will face inflation.

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