Explanation Given information: An investment with compound amount $ 675 made for 15 months at 2.7 % interest compounded quarterly. Formula used: Compounding period 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 present value (principal) can be calculated by the formula given below: Present value ( Principal ) = A ( 1 + i ) n Here, A is the compound amount, i is the interest rate per period and n is the total number of periods. The compound interest can be calculated by the formula given below: Compound interest = Compound amount − Principal Calculation: Consider the compound amount $ 675 is made for 15 months at 2.7 % interest compounded quarterly and solve as shown below: Since, the variables-compound amount, 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 = 1.25 × 4 ( In quarterly compounding, m = 4 ) = 5 Calculate the interest rate per period as below: Interest rate per period = Nominal rate Period per year ( m ) = 2

Contemporary Mathematics for Business & Consumers - With LMS CengageNOW

8th Edition

ISBN: 9781337125468

Author: Brechner

Publisher: Cengage

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Chapter 11.II, Problem 26RE

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To calculate: The present value (principal) and the compound interest that has compound amount $675 is made for 15 months at 2.7% interest compounded quarterly.

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Chapter 11.II, Problem 25RE

Chapter 11.II, Problem 27RE

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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 present value (principal) and the compound interest that has compound amount $ 675 is made for 15 months at 2.7 % interest compounded quarterly.

Solution Summary: The author explains how the present value and the compound interest can be calculated by dividing the annual rate by the number of periods per year.

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To calculate: The present value (principal) and the compound interest that has compound amount $675 is made for 15 months at 2.7% interest compounded quarterly.

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Chapter 11 Solutions