score: 0.33 of 1 pt 7 of 22 (12 complete) 13.1.23 If $2000 is invested at 1 1% c

Question

score: 0.33 of 1 pt 7 of 22 (12 complete) 13.1.23 If $2000 is invested at 1 1% compounded (a) annually, (b) semiannually, or (c) quarterly, what is the amount after 5 years? (a) If it is compounded annually, what is the amount after 5 years? A- $ 3370.12 (Round to the nearest cent as needed.) (b) If it is compounded semiannually, what is the amount after 5 years? A= $ 3416.29 (Round to the nearest cent as needed.) (c) If it is compounded quarterly, what is the amount after 5 years? (Round to the nearest cent as needed.)

Explanation / Answer

Solution of Question 7:

compound interest formula: A=P(1+i)^n,

P=initial investment,

i=interest rate per period

n=number of periods,

A=amount after n year

..

For annual compounding:

P=2000

i=11%/100=0.11

n=5*1=5

A=2000(1+.11)^5

A=2000(1.11)^5

A=2000*1.6850=$3370.116
..

For semianually compounding:

P=2000

i=11%/(2*100)= 0.055

n=5*2=10

A=2000(1+.055)^10

A=2000(1.055)^10

A=$3416.288
..

For quaterly compounding:

P=2000

i=11%/(4*100) = 0.0275

n=5*4=20

A=2000(1+ 0.0275)^20

A=2000*(1.0275)^20

A=$3440.8568

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