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v1 Financial Maths, STD2 F4 2022 HSC 11 MC

In eight years, the future value of an investment will be $120 000. The interest rate is 6% per annum, compounded half-yearly.

Which equation will give the present value `(PV)` of the investment?

  1. `PV=(120\ 000)/((1+0.06)^(8))`
  2. `PV=(120\ 000)/((1+0.03)^(8))`
  3. `PV=(120\ 000)/((1+0.03)^(16))`
  4. `PV=(120\ 000)/((1+0.06)^(16))`
Show Answers Only

`C`

Show Worked Solution

`text{Compounding periods} = 8 xx 2 = 16`

`text{Compounding rate} = (6text{%}) / 2 = 3text{%} = 0.03`

`PV = (120\ 000) / ((1 + 0.03) ^{16})`

`=> C`