QUESTION 1 10 points Save Answer 1f you want to have $4,731 at the end of 7 year

Question

QUESTION 1 10 points Save Answer 1f you want to have $4,731 at the end of 7 years. how much must you invest now. If the interest rate is 1 1 .8% per year, compounded semiannually? QUESTION 2 10 points Save Answer when Paulina turned 28, she made a S41.774 at a 16.7% nterest rate compounded semi annually. How much will the nvestment be worth when she turns 9 vears old QUESTION 3 10 points Sava Answar 11 ou won a S483 074 lottery proe at age 27 and invested it at 9 5% compounded 10 times a year how much would it be worth it ou retied at age 557 QUESTION 4 10 points ave Answer How much would $8,268 be worth atter 16 years t you received 16 8% interest per year compounded quarterly? QUESTION 5 10 points Save Answer How much would $9,613 be worth fter 3 years if you received 5.5% interest per year, compounded semiannually?

Explanation / Answer

Solution:

The required formula is : A = P*(1 + (r/n))n*t;

where A is the amount on maturity, P is the principal amount, i.e, amount deposited, r is the interest rate (in decimal point), n is the number of times interest compounded in an year, and t is the time period(in years). Then,

Q1) We have A = $4,731, t = 7 years, r = 0.118. Since compounded semianually, meaning interest is compounded 2 times in an year so n = 2, we have to find value of P

Using the formula, 4731 = P*(1 + 0.118/2)2*7

4731 = P*(1.059)14

So, P = 4731/2.23 = $2,121.52 (approx)

Q2) P = $41,774, r = 0.167, since compounded semi-anually, n = 2, t = 49-28 = 21; A = ?

Using the above formula, A = 41774*(1 + 0.167/2)2*21

A = 41774*(1.0835)42

A = 41774*29.028 = $1,212,608.25 (approx)

Q3) P = $483,074, r = 0.095, n = 10, t = 65-27 = 38 years; A = ?

Using the above formula, A = 483074*(1 + 0.095/10)10*38

A = 483074*(1.0095)380

A = 483074*36.34 = $17,555,633.7 (approx)

Q4) P = $8,268, r = 0.168, t = 16, since compounded quarterly, n = 4; A =?

A = 8268*(1 + 0.168/4)4*16

A = 8262*(1.042)64

A = 8262*(13.9166) = $114,979.179 (approx)

Q5) P = $9,613, t = 3 years, r = 0.065, n = 2, A=?

A = 9613*(1 + 0.065/2)2*3

A = 9613*(1.0325)6

A = 9613*1.21 = $11,646.6 (approx)

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