Explanation Given: Two different investments: First investment is of $500 at the age of 23 and second investment is of $500 at the age of 65. Explanation: Ali Williams has two options. He can invest $500 at the age of 23 or at the age of 40 at 5% compounded quarterly. Compute the amount of two investments when he is 65. Use the formula for the compound amount: A = P ( 1 + i ) n Here, A is the amount, P is the principal, i is the interest rate per period, and n is the number of periods. As money is compounding quarterly: i = 1 4 × 5 % = 1.25 % = 0.0125 If he invests at the age of 23, the number of periods will be n = 4 × ( 65 − 23 ) = 4 × 42 = 168 Substitute P = $ 500 , i = 0.0125 , and n = 168 ; the amount will be A 1 = 500 × ( 1 + 0.0125 ) 168 = 500 × 1.0125 168 = 500 × 8.0605626 = 4030.281316 Rounding to two decimal places: A 1 = 4030

11th Edition

ISBN: 9780321979438

Author: Margaret L. Lial, Raymond N. Greenwell, Nathan P. Ritchey

Publisher: PEARSON

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Chapter 5, Problem 69RE

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The difference in the amounts of investments of $500 at two different ages at 5% compounded quarterly.

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Chapter 5, Problem 68RE

Chapter 5, Problem 70RE

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Chapter 5 Solutions

Finite Mathematics (11th Edition)

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The difference in the amounts of investments of $500 at two different ages at 5% compounded quarterly.

Solution Summary: The author explains that Ali Williams can invest 500 at 23 or at the age of 40 at 5% compounded quarterly.

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The difference in the amounts of investments of $500 at two different ages at 5% compounded quarterly.

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Chapter 5 Solutions