please show work for question 10! INTEREST FORMULAS mt Simple Inteest A-P(1 +rt)
ID: 1172673 • Letter: P
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please show work for question 10!
INTEREST FORMULAS mt Simple Inteest A-P(1 +rt) Compound Interest A P1+7 m2 Compound Interest: A-Pe Annual Percentage Yield (or effective rate): APY-1+ -1 where P is the amount invested (principa), (expressed as a decimal is the annual interest rate, t is time invested (in years), m is the number of times a year the interest is compounded, and A is the amount of money in the account after tyears (future value). 6. Suppose that $2000 is invested in an account paying 1% annual interest. Compare the balance after 20 years using simple interest and compound interest (compounded once a year) formulas. 7. If $5000 is invested in an account that pays 2% annual compounded interest, compare the amount in the account after 10 years if the interest is compounded: a) semiannually (twice a year) b) quarterly (four times a year) c) monthly (telve times a year) d) continuously 8. You are saving for the down-payment on a house and plan to buy the house in 5 years. How much would you need to invest in an account that pays 4.5% compounded monthly in order to have $10,000 for your down-payment? 9. Joel can choose between two different banks to invest his money. Bank A offers 5.9% interest compounded quarterly. Bank B offers 5.82% interest compounded monthly. Find the APY of each investment so that you can tell Joel in which bank it is better for him to nvest 10. To accumulate S20,000 on your daughter's 18th birthday, how much must you invest on her second birthday in a CD paying 4% compounded quarterly?Explanation / Answer
You need to invest on 2nd birthday till 18th borthday. So number of years = 16 years.
We will again use the compound interest formula, according to which,
Amount Accumulated = P * (1 + r)n
r = 4%/4 (quarterly rate) = 1%, n = 4* 16 quarters = 64 quarters
20,000 = P * (1 + 1%)64
P= $10,579.43 --> Amount to be deposited on 2nd birthday
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