   Chapter 11.I, Problem 29RE ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

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.Sherry Smith invested $3,000 at the Horizon Bank at 6 % interest compounded quarterly.a. What is the annual percentage yield of this investment?b. What will Sherry’s investment be worth after 6 years? (a) To determine To calculate: The annual percentage yield from the investment, if an investment with principal$3,000 is made at 6% compounded quarterly.

Explanation

Given information:

An investment with principal $3,000 is made at 6% compounded quarterly. Formula used: 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 compound amount (Future value) can be calculated by the formula given below: 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.

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

Compound interest=Compound amountPrincipal

The annual percentage yield (APY) can be calculated by the formula given below:

APY=Total compound interest earned in 1 yearPrincipal

Calculation:

Consider the statement as “An investment with principal $3,000 is made at 6% compounded quart (b) To determine To calculate: The worth of sherry’s investment after 6 years, if an investment with principal$3,000 is made at 6% compounded quarterly.

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