Chapter 11, Problem 16AT

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

Chapter
Section

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Solve the following word problems by using Table 11-1 or 11-2. When necessary, create new table factors. Round dollars to the nearest cent and percents to the nearest hundredth of a percent.What is the present value of $73,000 in 11 years if the interest rate is 8 % compounded semiannually? To determine To calculate: The present value (principal) for an investment with compound amount$73,000 made for 11 years at 8% interest compounded semi-annually using the table 112. Also, round your answer to the nearest cent.

Explanation

Given Information:

An investment with compound amount $73,000 made for 11 years at 8% interest compounded semi-annually. Formula used: Compounding period can be defined as the duration or length of time from one interest payment to the next. If an investment made for 4 years at 6% compounded annually (once per year) then it would have four compounding period which 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 ratePeriod per year The present value (principal) can be calculated by the formula given below: Principal=Table factor×Compound amount In Present value table 11-2, the table factor is the intersection of the rate-per-period column and the number-of-periods row is the present value of$1 at compound interest.

The compound interest can be calculated by the formula given below:

Compound interest=Compound amountPrincipal

Steps for using the present value table:

Step 1: Along the top row for finding the interest rate per period.

Step 2: See below that column of the row corresponding to the number of periods.

Step 3: The table factor found at the intersection of the rate-per-period column and the number-of-periods row is the present value of \$1 at compound interest

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