Chapter 11, Problem 6AT

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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 |

$10,000 | 4 | 6 | Monthly | _______ | _______ |

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: monthly

Calculate the compounding periods for the investment,

Calculate the interest rate per period for the investment,

Sect-11.I P-1TIESect-11.I P-2TIESect-11.I P-3TIESect-11.I P-4TIESect-11.I P-5TIESect-11.I P-1RESect-11.I P-2RESect-11.I P-3RESect-11.I P-4RESect-11.I P-5RE

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