Answer to Question #149627 in Financial Math for Gugu

Question

COMPOUND INTERESTI
Find the future value (compound amount) and the compound interest, as indicated, for
each of the following investments. Round answers to the nearest cent. Use a calculator
or Table 16-1 to find FVF.
Present
Term
Value
Rate
4 years
.S6,000
6% compounded monthly
2. $960
6% compounded semiannually
years
8 years
3.
S20,000
8% compounded quarterly

Answer 1

Future value formula:

FV = PV* (1+r)ⁿ; FV - future value, PV - present value, r - rate of return, n - number of periods

compound interest = FV-PV

1) PV = 6000

n = 12*4 = 48

r = 0.06/12 = 0.005

FV = 6000*(1+0.005)⁴⁸ = 7622.93

compound interest = 7622.93-6000 = 1622.93

2) PV = 960

n = 11*2 = 22

r = 0.06/2 = 0.03

FV = 960*(1+0.03)²² = 1839.46

compound interest = 1839.46-960 = 879.46

3) PV = 20000

n = 8*4 = 32

r = 0.08/4 = 0.02

FV = 20000*(1+0.02)³² = 37690.80

compound interest = 37690.80-20000 = 17690.80