$5,100 invested for 9 years at 10 percent compounded annually will accumulate to

Question

$5,100 invested for 9 years at 10 percent compounded annually will accumulate to $____ round to nearest cent.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

a.   A calculate the future value of $5,000, given that it will be held in the bank for 7 years and earn an annual interest rate of 6 percent..

b. Recalculate part (a) using a compounding period that is (1) semiannual and (2) bimonthly.

c. . Recalculate parts (a) and (b) using an annual interest rate of 12 percent.

d. Recalculate part (a) using a time horizon of 14 years at an annual interest rate of 6 percent.

e. What conclusions can you draw when you compare the answers in parts c and (d) with the answers in parts (a) and b)?

Explanation / Answer

1.   $5,100 invested for 9 years at 10 percent compounded annually will accumulate to $12025.                                 

a. $5,000,  for 7 years and earn an annual interest rate of 6 percent.

=  $ 7100                         

b.  (1) semiannual   for part 1

$122273

(2) compounded bimonthly.

= $12451                           

c. . Recalculate parts (a) and (b) using an annual interest rate of 12 percent.  

a. $14557 r = 12% compounded semi annually;

b. $14858 for r=12% compounded bimonthly;

d. Recalculate part (a) using a time horizon of 14 years at an annual interest rate of 6 percent

$ 11530;

formula used :

1. Compound annually

A = p (1 + r/100)^n ;

n no. of years, r rate

for semi annually r = r/2and n '= 2*n and bi monthly r = r/6 and n'= 6*n;

for SI A = p + p*r*t/100

Comparison :

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