Suppose that you invest $5,000 at 6% interest, compound quarterly, for 5 years. use Table 11-1 to calculate the compound interest (in $) on your investment.
Suppose that you invest $5,000 at 6% interest, compound quarterly, for 5 years. use Table 11-1 to calculate the compound interest (in $) on your investment.
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:Suppose that you invest **$5,000** at 6% interest, compounded quarterly, for 5 years. Use **Table 11-1** to calculate the compound interest (in $) on your investment.
![**Table 11-1: Compound Interest Table (Future Value of $1 at Compound Interest)**
This table illustrates the future value of $1 compounded at various interest rates, ranging from 0.5% to 18%, over different periods ranging from 1 to 25.
### Structure of the Table:
- **Columns:** Each column represents an interest rate from 0.5% to 18%. The interest rates are labeled at the top of each column.
- **Rows:** Each row corresponds to a different period, from 1 to 25.
- **Values:** Each cell in the table provides the future value of $1 invested at the given interest rate and period.
### Explanation of Values:
The values in this table were generated using the formula:
\[ FV = (1 + i)^n \]
Where:
- \( FV \) is the future value.
- \( i \) is the interest rate per period.
- \( n \) is the total number of periods.
The results are rounded to five decimal places.
### Example of Table Usage:
- **Interest Rate:** 5%
- **Periods:** 10
To find the future value of $1 at a 5% interest rate over 10 periods, locate the intersection of the 5% column and the 10 periods row. Based on the table, the future value is \( 1.62889 \).
This table serves as a quick reference for determining how much $1 grows under compound interest, aiding financial planning and educational endeavors in finance-related fields.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fddf5589e-d92b-42b2-8ea5-90a454d595c8%2Fb6871b6f-ded5-428b-b96c-748f65b40602%2F3oyncxw_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Table 11-1: Compound Interest Table (Future Value of $1 at Compound Interest)**
This table illustrates the future value of $1 compounded at various interest rates, ranging from 0.5% to 18%, over different periods ranging from 1 to 25.
### Structure of the Table:
- **Columns:** Each column represents an interest rate from 0.5% to 18%. The interest rates are labeled at the top of each column.
- **Rows:** Each row corresponds to a different period, from 1 to 25.
- **Values:** Each cell in the table provides the future value of $1 invested at the given interest rate and period.
### Explanation of Values:
The values in this table were generated using the formula:
\[ FV = (1 + i)^n \]
Where:
- \( FV \) is the future value.
- \( i \) is the interest rate per period.
- \( n \) is the total number of periods.
The results are rounded to five decimal places.
### Example of Table Usage:
- **Interest Rate:** 5%
- **Periods:** 10
To find the future value of $1 at a 5% interest rate over 10 periods, locate the intersection of the 5% column and the 10 periods row. Based on the table, the future value is \( 1.62889 \).
This table serves as a quick reference for determining how much $1 grows under compound interest, aiding financial planning and educational endeavors in finance-related fields.
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