Answer to Question #210497 in Financial Math for nadiahkk98

Question

 b.  RM 2500 is invested for 4 years 9 months with interest rates of 8% compounded monthly for the first two years and 6.5% compounded annually for the rest of the period. Find the accumulated amount and interest earned.

Answer 1

Solution.

1) first two years = first 24 months

From the formula

$$A_n=A_0(1+\frac{p}{100})^n$$

we will have

$$A_n=2500(1+\frac{\frac{8}{12}}{100})^{24}=2932.$$

2) next period=33 months

From the formula

$$A_n=A_0(1+\frac{p}{100})^n$$

we will have

$$A_n=2932(1+\frac{6.5}{100})^{\frac{33}{12}}=3486.$$

3) The accumulated amount is equal 3486 RM.

Interest earned is 3486-2500= 986 RM.