For each of the following questions be sure to create a list that outlines the values for N, C/Y-P/Y, I/Y, P.V., and F.V., as well as to show any subsequent calculations. Be sure to make a closing statement which addresses the question being asked.
A) How much interest will a six-year term deposit of $5000 at 6.5% compounded quarterly gain?
B) Find the principal that will amount to $1250 in 6 years at 10% p.a. compounded semi-annually.
C)What quarterly compounded interest rate would allow an investment to triple in 8 ½ years?
A)
Future value = present value * ( 1 + int rate )^no of periods
= 5000 * 1.01625^24
= 7361.79
Interest = future value - depoit amount = 7361.79 - 5000 = 2361.79
PV +-5000 N = 6.25/4 = 1.625 N = 6*4 = 24 CPT< FV
six-year term deposit of $5000 at 6.5% compounded quarterly will gain 2361.79
B)
Future value = Present value * ( 1 + int rate ) ^no of periods
1250 = Principal* 1.05^12
Principal = 1250 / 1.05^12 = 696.05
FV = 1250
N=6*2=12
I/Y = 10/2 = 5
CPT < PV
principal that will amount to $1250 in 6 years at 10% p.a. compounded semi-annuallY = 696.05
C)
Let the amount of money invested be 100
future value = 300
300 = 100 *( 1 +r) ^34
3^1/34 = ( 1+r)
r = 3.28
quarterly compunded int rate = 3.28*4 =13.12%
FV = 3
PV =+-1
N=34
CPT < I/Y
quarterly compounded interest rate would allow an investment to triple in 8 ½ years = 13.12%
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