Explanation Given information: An investment with principal $ 2 , 000 is made for 4 year at 6 % compounded annually. Formula used: Compounding period can be defined as the duration or length of time from one interest payment to the next. If an investment made for 4 years at 6 % compounded annually (once per year) then it would have four compounding period which can be calculated by formula given below: Compounding periods = Term of investments ( years ) × m Here, m is the period per year. The interest rate per period can be calculated by dividing the annual, or nominal, rate by the number of periods per year, Interest rate per period = Nominal rate Period per year The compound amount (Future value) can be calculated by the formula given below: A = P × ( 1 + i ) n Here, P is the principal, i is the rate per period and n is the compounding period. The compound interest can be calculated by the formula given below: Compound interest = Compound amount − Principal Calculation: Consider the investment with principal $ 2 , 000 is made for 4 year at 6 % compounded annually and solve as shown below: Since, the variables- principal, time period (years), nominal rate and interest compounded are given; therefore, the compounding period can be calculated as below: Compounding periods ( n ) = Term of investments ( years ) × m = 4 × 1 ( In annual compounding, m = 1 ) = 4 Calculate the interest rate per period as below: Interest rate per period = Nominal rate

Contemporary Mathematics For Business & Consumers, Loose-leaf Version

8th Edition

ISBN: 9781305867185

Author: Robert Brechner, Geroge Bergeman

Publisher: South-Western College Pub

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Chapter 11.I, Problem 11RE

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To calculate: The compound amount and the compound interest for given investments with principal $2,000 is made for 4 year at 6% compounded annually.

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Chapter 11 Solutions

Contemporary Mathematics For Business & Consumers, Loose-leaf Version

Ch. 11.I - Gail Parker invested $10,000 at 6% interest...Ch. 11.I - Jenny Chao invested $20,000 at 6% interest...Ch. 11.I - Prob. 3TIE Ch. 11.I - Jill Quinn invested $7,000 in a certificate of...Ch. 11.I - Prob. 5TIE Ch. 11.I - Prob. 1RE Ch. 11.I - For the following investments, find the total...Ch. 11.I - For the following investments, find the total...Ch. 11.I - Prob. 4RE Ch. 11.I - Prob. 5RE

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The compound amount and the compound interest for given investments with principal $ 2 , 000 is made for 4 year at 6 % compounded annually.

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Chapter 11 Solutions