Chapter 11.I, Problem 22RE

### 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

# The following investments require table factors for periods beyond the table. Create the new table factor, rounded to five places, and calculate the compound amount for each.Principal Time Nominal Interest New Table CompoundPeriod (years) Rate (%) Compounded Factor Amount_________________________________________________________________________$10,000 40 3 annually ________ ________ To determine To calculate: The new table factor and the compound amount when the investment of principal$10,000 is made for 40 years at 3% compounded annually.

Explanation

Given information:

An investment with principal $10,000 is made for 40 years at 3% compounded annually. Formula used: Compounding periods=Term of investments(years)×period per year Interest rate per period = NominalRatePeriod per year Compound amount=Table factor×Principal In table 11-1, the table factor is the intersection of the rate-per-period column and the number-of-periods row is the future value of$1 at compound interest.

When the number of periods of an investment is greater than the number of periods provided by the compound interest table, then compute a new table factor by following below steps:

Step1. For the stated interest rate per period, find the two table factors that represent half, or values as close as possible to half, of the periods required.

Step2. Multiply the two table factors from step 1 to form the new factor.

Step3. Round the new factor to five decimal places.

Calculation:

Consider the investment with principal \$10,000 is made for 40 years at 3% compounded annually and solve as shown below:

Compounding periods=Term of investments(years)&

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