Chapter 11, Problem 25AT

### 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.Over the past 10 years, you’ve made the following investments:Deposited $10,000 at 8 % compounded semiannually in a 3-year certificate of deposit.After 3 years, you took the maturity value (principal and interest) of that CD and added another$5,000 to buy a 4-year, 6 % certificate compounded quarterly.When that certificate matured, you added another $8,000 and bought a 3-year, 7 % certificate compounded annually.a. What was the total worth of your investment when the last certificate matured?b. What is the total amount of compound interest earned over the 10-year period? (a) To determine To calculate: The total worth of the investment when the certificate matured from the following investment; 1: Deposition of$10,000 at 8% compounded semiannually in a 3-year certificate of deposit.

2: After 3 years, the maturity value was extracted and another $5,000 to buy a 4-year, 6% certificate compounded quarterly. 3: When the certificate matured another$8,000 were and a 3-year, 7% certificate a 3-year, 7% certificate compounded annually was bought.

Explanation

Given information:

A set of investments,

1: Deposition of $10,000 at 8% compounded semiannually in a 3-year certificate of deposit. 2: After 3 years, the maturity value was extracted and another$5,000 to buy a 4-year, 6% certificate compounded quarterly.

3: When the certificate matured another $8,000 were and a 3-year, 7% certificate a 3-year, 7% certificate compounded annually was bought. Formula used: Formula to calculate future amount on an investment. Future Value=Principal(1+R100n)nt. Where, R is the rate of interest, n is the compounding of interest and t is the time period. Calculation: Since, the initial investment is$10,000. Therefore, the amount after 3 years at 8% semiannually compound interest will be as mentioned below.

FV=10,000(1+82100)6=10,000(208200)6=12653.19

Since, $5000 were added to the amount$12653

(b)

To determine

To calculate: The total amount of compound interest earned over the period of 10 years, if the provided investment is;

1: Deposition of $10,000 at 8% compounded semiannually in a 3-year certificate of deposit. 2: After 3 years, the maturity value was extracted and another$5,000 to buy a 4-year, 6% certificate compounded quarterly.

3: When the certificate matured another \$8,000 were and a 3-year, 7% certificate a 3-year, 7% certificate compounded annually was bought.

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