An investment is advertised as returning 5.5% every 6 months (semiannually), compounded semiannually. if $50,000 is invested, the growth can be modeled by the equation a(t) = 50,000(1.055)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 ten-thousand dollar) after 20 years?

(A) 11.3% (B) $430,000

Explanation:

There seems to be an error in the compounding equation written as A(t) = 50,000(1.055)2t.

Compounding the semi annual return, the equation should be

where t is the number of years.

The equation is similar to the first expected that 1.055 is raised to the power of (2t) and not multiplied by it.

(A) Compounding at 5.5% semi-annually, the equivalent annual growth rate is computed as follows.

=

= 1.113025 - 1

= 0.113025 = 11.3025%

= 11.3% (to the nearest tenth of a percent).

(B) In 20 years, the investment will be worth

(where t=20)

=

=

= 50,000 * 8.5133

= $425,665

= $430,000 (to the nearest ten thousand dollars)

$2.00 for three shots.

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans. 

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.