An investments account offers a 12% annual return. If $35,000 is placed in the account for two years, by how much will the investment grow if interest is compounded (a) annually, (b) semiannually, (c) quarterly, or (d) monthly? Note: Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1 Initial Investment Annual Interest Rate Compounded Period Invested Future Value a. $ 35,000 12% Annually 2 years b. 35,000 12% Semiannually 2 years C. 35,000 12% Quarterly 2 years d. 35,000 12% Monthly 2 years

An investments account offers a 12% annual return. If $35,000 is placed in the account for two years, by how much will the investment grow if interest is compounded (a) annually, (b) semiannually, (c) quarterly, or (d) monthly? Note: Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1 Initial Investment Annual Interest Rate Compounded Period Invested Future Value a. $ 35,000 12% Annually 2 years b. 35,000 12% Semiannually 2 years C. 35,000 12% Quarterly 2 years d. 35,000 12% Monthly 2 years

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The current amount A of a principal P invested in a savings account paying an annual interest rate r is given by A = P(1+r/n)^(rt) where n is the number of times per year the interest is compounded. For continuous compounding, A = Pe^(rt). Suppose $10,000 is initially invested at 2.5 percent (r = 0.025). a. Plot A versus t for 0 ≤ t ≤ 20 years for four cases: continuous compounding, annual compounding (n = 1), quarterly compounding (n = 4), and monthly compounding (n = 12). Show all four cases on the same subplot and label each curve. On a second subplot, plot the difference between the amount obtained from continuous compounding and the other three cases. b. Redo part a, but plot A versus t on log-log and semilog plots. Which plot gives a straight line?
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