Answer:
$99,771
Explanation:
future value = present value x (1 + interest rate)ⁿ
- present value = $55,000
- interest rate = 3% / 2 = 1.5% semiannual
- n = 20 years x 2 = 40 semiannual periods
future value = $55,000 x (1 + 1.5%)⁴⁰ = $55,000 x 1.81402 = $99,771
When interest is compounded semiannually, the effective interest rate is slightly higher than when it is compounded annually.
effective interest rate = (1 + 3%/2)² - 1 = 3.0225%
