Question

Jim opened an account with $400. The account pays three percent quarterly. How much is in the account at the end of two years? Round to the nearest dollar. (Points : 1)


5. Use this table to answer questions 5 through 8.
Principal Rate Compounded Time Final Amount
$10,000 2% daily 5 y A
$10,000 2% quarterly 5 y B
$10,000 3% semiannually 10 y C
$10,000 3% quarterly 10 y D

Calculate A. Round to the nearest dollar.

(Points : 1)


6. Calculate B. Round to the nearest dollar. (Points : 1)


7. Calculate C. Round your answer to the nearest dollar. (Points : 1)


8. Calculate D. Round your answer to the nearest dollar. (Points : 1)

Answer 1

Pt = 400(1+r)^n.

r = (3%/4) / 100% = 0.0075 = Quarterly
% rate expressed as a decimal.

n = 4comp periods/yr * 2yrs = 8 Compounding periods.

Pt = 400(1.0075)^8 = $425.

Answer 2

5. $10,000 @ 2%, Daily, 5yrs.

Pt = Po(1+r)^n.

r = (2%/365) / 100% = 0.00005479. = Daily % rate expressed as a decimal.

n = 360 comp/yr * 5yrs = 1800 = The number of compounding periods.

Pt = 10000(1.00005479)^1800 = $11,037.

6. $10,000 @ 2%, Q, 5yrs.

r = (2%/4) / 100% = 0.005.

n = 4comp/yr * 5yrs = 20 comp. periods.

Pt = 10000(1.005)^20 = $11,049.

7. $10,000 @ 3%, Semi-ann, 10yrs.

Pt = Po(1+r)^n.

r = (3%/2) / 100% = 0.015 = Semi-annual
% rate expressed as a decimal.

n = 2comp/yr * 10yrs=20 Comp. periods.

Pt = 10000(1.015)^20 = $13,469.

8. Same procedure as 6.