At the end of every 3 months, Teresa deposits $1500 into an account that pays 6% compounded quarterly for 4 years. A) When this certificate matures, how much will Teresa have accumulated B) How much interest did Teresa earn? Show the use of the appropriate formulas for each part by indicating the evaluation of the formula with the information and provide the answer. Be sure to label the parts using the provided letters and organize your work neatly.
At the end of every 3 months, Teresa deposits $1500 into an account that pays 6% compounded quarterly for 4 years. A) When this certificate matures, how much will Teresa have accumulated B) How much interest did Teresa earn? Show the use of the appropriate formulas for each part by indicating the evaluation of the formula with the information and provide the answer. Be sure to label the parts using the provided letters and organize your work neatly.
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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Transcribed Image Text:llustration 10-1 Compound Interest Formulas
Formula
If periodic payment is made at
the beginning of each period
When to use
Need to know FV; know PV
FV = PV(1 + i)
IA
Not applicable.
PV
Need to know FV; know PMT
Multiply the result by (1 + i).
(1 + i) -
FV = PMT
IB
PMT PMT PMT PMT
РМТ РМТ РМТ РМТ
Need to know PV; know FV
PV =FV
2A
Not applicable.
(1 + i)
FV
Multiply the result by (1 + i).
PMT PMT PMT PMT
Need to know PV; know PMT
PMT PMT PMT PMT
2B
PV = PMT
(1 + i)"
?
Need to know interest rate; know PV
and FV
FV
- 1
i = ?
Not applicable.
i =
FV
PV
Divide the result by (1 + i).
Need to know PMT; know FV
FV(i)
4A
PMT =
FV
(1 + i)" - 1
FV
Divide the result by (1 + i).
Need to know PMT; know PV
PV(i)
4B
PMT
PV
1-
(1 + i)"
PV
Need to know n; know at least two of these
variables: PV, FV, PMT
PV + (1 + i) (PMT)
- In
(PMI)
(1 + i) (PMT) - FV
PV +
- In
PMT -FV
5*
n= ?
n =
In(1 + i)
n =
In(1 + i)
esent value; FV = future value: PMT = periodic payment; i = interest rate per period, expressed in decimal form; n = total number of periods. The
ymbol In stands for natural logarithm.
Dona S is a comprehensive formula that covers quite a few situations. For this formula, use proper sign convention for PV, FV, and PMT. Think of the
PV
Transcribed Image Text:Use the appropriate formula located on Illustration 10-1 on page 209 to solve the problem.
At the end of every 3 months, Teresa deposits $1500 into an account that pays 6% compounded quarterly for 4 years.
A) When this certificate matures, how much will Teresa have accumulated
B) How much interest did Teresa earn?
Show the use of the appropriate formulas for each part by indicating the evaluation of the formula with the information and provide the
answer. Be sure to label the parts using the provided letters and organize your work neatly.
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