171018& questionld-38flurhed-fabe&cld; 3861885¢erwin-yes; Christine Pellman
ID: 2766852 • Letter: 1
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171018& questionld-38flurhed-fabe&cld; 3861885¢erwin-yes; Christine Pellman 4/23/16 11 ork: 2-3 MyFinanceLab: Module Two Homework Probium P3-4 (simlartoj Anthomry and Michelle Coestantino just got investment earning 7 percent compounded annually. Would the future valse be in cash gifts for then wedding How much wthey hawe on ther twenty-fifth versaryr they place half of this money a thed-rate larger or smaller if the compounding period was 6 months? How mach moce or less would they have earnod with thas shorter married and received $26,000 in cash gifts for their wedding How much willthey have on compounding period? Click on the table icon to view the FVIF table Ir they pace hair of tis moncy, PV, in a fratevestmet caring 7 percet und to the nearest e ) rthey place halfofthas money, Vin a fixed rate mvestment earmmg 7 percent compounded annualy the amount they wd have, FV, o. ther twenty-fith amversary B ter your anaer in the answer box, then click Check AnsExplanation / Answer
Answer:
Anthony and Michelle got $26,000 in their wedding and $13,000(1/2), they have invested in 7% fixed rate investment.
Amount after 25 years (their 25th anniversary) FV = Principal Amount(PV) * (1 + Rate ) ^ Periods
= $13,000 * (1+7.00%) ^25
= $13,000 * 1.07^25
= $ 70,556.62
Answer: If remaining amount of $13,000 have been spent by them they will have $ 70,556.62 after 25 years.
Further if compounding is done every 6 months then amount (FV) will be = $ 13,000 * (1+ 6 monthly rate)^ Periods
= $13,000 * (1+ 7% / 2) 25*2
=$13,000 * 1.035^50
= $ 72,604.05
If compounding is done every 6 months they will have $ 72,604.05 after 25 years. They will have extra $2,047.42 ($72,604.05 - $ 70,556.62) if compounding is done every 6 months.
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