Explanation Given information: An investment with principal $ 4 , 000 is made for 2 years at 10 % 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 $ 4 , 000 made for 2 years at 10 % 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 = 2 × 1 ( In annual compounding, m = 1 ) = 2 Calculate the interest rate per period as below: Interest rate per period = Nominal r

Contemporary Mathematics For Business & Consumers, Brief Edition, Loose-leaf Version

8th Edition

ISBN: 9781305867192

Author: Robert Brechner, Geroge Bergeman

Publisher: South-Western College Pub

See similar textbooks

Concept explainers

Unitary Method

The word “unitary” comes from the word “unit”, which means a single and complete entity. In this method, we find the value of a unit product from the given number of products, and then we solve for the other number of products.

Speed, Time, and Distance

Imagine you and 3 of your friends are planning to go to the playground at 6 in the evening. Your house is one mile away from the playground and one of your friends named Jim must start at 5 pm to reach the playground by walk. The other two friends are 3 …

Profit and Loss

The amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item.

Units and Measurements

Measurements and comparisons are the foundation of science and engineering. We, therefore, need rules that tell us how things are measured and compared. For these measurements and comparisons, we perform certain experiments, and we will need the experime…

Videos

Question

Chapter 11.I, Problem 8RE

To determine

To calculate: The compound amount and the compound interest for given investments with principal $4,000 is made for 2 years at 10% compounded annually.

Expert Solution & Answer

Chapter 11 Solutions

Contemporary Mathematics For Business & Consumers, Brief Edition, 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

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 given investments with principal $ 4 , 000 is made for 2 years at 10 % compounded annually.

Concept explainers

Videos

To calculate: The compound amount and the compound interest for given investments with principal $4,000 is made for 2 years at 10% compounded annually.

Chapter 11 Solutions