Chapter 11, Problem 5AT

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

The following investments require table factors for periods beyond the table. Create the new table factor and calculate the compound amount for each.

Principal |
Time Period (years) |
Nominal Rate (%) |
Interest Compounded |
New Table Factor |
Compound Interest |

$20,000 | 11 | 8 | quarterly | _______ | _______ |

To determine

**To calculate:** The new table factors and the compound amount for the investment of the amount

Explanation

**Given Information:**

An investment with principal amount

**Formula used:**

Interest rate per period:

It can be calculated by dividing the annual rate by the number of periods per year.

Compounding periods:

It can be calculated by multiplying the number of years by the number of periods per year.

Compound amount:

It can be calculated by multiplying the table factor with principal.

Steps for creating new compound interest table factors:

Step I: For the stated rate per period, first, find the two table factors that signify *half*, or values as close as possible to half, of the periods required.

Step II: Multiply the two table factors obtained in Step I to form the new factor.

Step III: Now, round the new factor to the five decimal places.

**Calculation:**

The values of investment are:

Principal:

Time-period:

Nominal rate:

Interest compounded: quarterly

Calculate the compounding periods for the investment,

Calculate the interest rate per period for the investment,

Thus, the investment is looking for table factor for interest rate per period of

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