Explanation Given information: An investment with principal $ 25 , 000 is made for 15 years at 5 % 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: Compound amount = Table factor × Principal In table 11-1, the table factor is the intersection of the rate-per-period column and the number-of-periods row is the future value of $ 1 at compound interest. The compound interest can be calculated by the formula given below: Compound interest = Compound amount − Principal Calculation: Consider the investment with principal $ 25 , 000 is made for 15 years at 5 % 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 ) = T

Contemporary Mathematics for Business & Consumers - With LMS CengageNOW

8th Edition

ISBN: 9781337125468

Author: Brechner

Publisher: Cengage

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Chapter 11.I, Problem 16RE

To determine

To calculate: The compound amount and the compound interest for the investment with principal $25,000 is made for 15 years at 5% compounded annually by using table.

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Chapter 11 Solutions

Contemporary Mathematics for Business & Consumers - With LMS CengageNOW

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 the investment with principal $ 25 , 000 is made for 15 years at 5 % compounded annually by using table.

Solution Summary: The author calculates the compound amount and compound interest for an investment with principal 25,000 for 15 years at 5%.

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To calculate: The compound amount and the compound interest for the investment with principal $25,000 is made for 15 years at 5% compounded annually by using table.

Chapter 11 Solutions