Question

$26100 was deposited into an investment account earning interest at a nominal rate of j2=x% for 10 years. You are given that the corresponding total amount of interest earned in the first 4 years is $8032.22. Determine x. Do not round in intermediate and final answers.

Answer 1

$26100 was deposited into an investment account earning interest at a nominal rate of j2=x% for 10 years. You are given that the corresponding total amount of interest earned in the first 4 years is $8032.22. Determine x. Do not round in intermediate and final answers.

- Amount depsoited in Investment account = $26,100

Interest earned over 4 years = $8032.22

Let Nominal Interest be X which is Compounded semi-annually as j2.

Calculating X:-

where, Invested Amount = $26,100

Interest = $8032.22

r = Periodic Interest rate = X

n= no of periods = 4

m = no of times compounding in a year = 2

Taking 8root on Both sides,

1.034107 = (1+ X/2)

X/2 = 0.034107

X = 0.068214 or 6.82%

So, X is 6.82%