Explanation Given information: An investment with principal $ 5 , 000 is made for 4 years at 4.2 % compounded semiannually. 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 $ 5 , 000 is made for 4 years at 4.2 % compounded semiannually 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 × 2 ( In semiannual compounding, m = 2 ) = 8 Calculate the interest rate per period as below: Interest rate per period = Nominal rate Period per year ( m ) = 4

8th Edition

ISBN: 9781305888715

Author: Brechner

Publisher: CENGAGE LEARNING - CONSIGNMENT

See similar textbooks

Videos

Question

Chapter 11.I, Problem 35RE

To determine

To calculate: The compound amount and the compound interest for the investment with principal $5,000 is made for 4 years at 4.2% compounded semiannually by using compound interest formula.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 11.I, Problem 34RE

Chapter 11.I, Problem 36RE

Students have asked these similar questions

What would you say about a set of quantitative bivariate data whose linear correlation is -1? What would a scatter diagram of the data look like? (5 points)

1. Which set of parametric equations is shown in the graph below? Explain your reasoning. a) x = t; y = t² b) x = = t²; y = t -3-2-1 5 4 3 2 1 12 3 2. Using the graph of f, a. determine whether dy/dt is positive or negative given that dx/dt is negative and b. determine whether dx/dt is positive or negative given that dy/dt is positive. Explain your reasoning. 2 f x 1 2 3 4

Find the perimeter of the triangle. Express the perimeter using the same unit of measure that appears on the given sides. 9 ft 13 ft 6 ft The perimeter is

Chapter 11 Solutions

EBK CONTEMPORARY MATHEMATICS FOR BUSINE

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

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, subject and related others by exploring similar questions and additional content below.

The compound amount and the compound interest for the investment with principal $ 5 , 000 is made for 4 years at 4.2 % compounded semiannually by using compound interest formula.

Solution Summary: The author calculates the compound amount and compound interest for an investment with principal 5,000. The compounding period is defined as the duration or length of time from one interest payment to the next.

Videos

To calculate: The compound amount and the compound interest for the investment with principal $5,000 is made for 4 years at 4.2% compounded semiannually by using compound interest formula.

Want to see the full answer?

Chapter 11 Solutions