Homework: Chapter 3. Learning Objective 2. Topic Homework 1 Save Score: 0 of 1 p
ID: 1170177 • Letter: H
Question
Homework: Chapter 3. Learning Objective 2. Topic Homework 1 Save Score: 0 of 1 pt 6 of 7 (7 complete) HW Score: 85.71%, 6 of 7 pts ? Problem 3.LO2.7 (similar to) EQuestion Help You deposit $400 in a bank in a 2 year time deposit. With a time deposit you cannot withdraw funds from the account until the end of the term. Interest in the account is compounded semiannual y m-2) at the annual nominal rate of 10%. In the final compounding interval. what is the dollar an ount ofinterest that is earned from earlier interest (rather than off of the original principa)? In the final compounding interval, what is the dollar amount of interest that is earned from earlier interest? (Round to the nearest cent.)Explanation / Answer
This is a case of compound interest where interest is earned on the interest earned earlier.
The question is asking the amout of interest earned on interest amount
In case of semi-annual compounded, with period = 4 i.e. 2 years
Interest earned on principal in first 6 months = 400*5% = $20
Interest earned on interest in next 6 months = 20*5% = $1+Interest on Principal = $20
Interest earned on interest in next 6 months = 41*5% = $2.05+Interest on Principal = $20
Interest earned on interest in next 6 months = 63.05*5% = $3.1525
Hence the answer is $3.1525
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.