Chapter 11.I, Problem 3TIE

### 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

# Stan Gray invests $3,500 at 8% interest compounded quarterly for 7 years. Calculate a new table factor and find the compound amount of Stan’s investment. To determine To calculate: The new table factor and compound amount invested by Stan Grey, who invested$3,500, compounded quarterly for 7 years at 8% interest rate.

Explanation

Given Information:

The person Stan Grey has invested an amount of \$3,500 at 8% where the useful life is 7 years with compounded quarterly.

Formula used:

The rate per period will be calculated as done below:

Interest rate per period=Nominal rate period per year

The compounding amount is calculated by the formula given below:

Compounding amount=Table factor× principal

Calculation:

Compound interest is defined as extra money made on original money deposited plus all preceding interests. The interest rate is 8% for 7 years quarterly. This implies that there would be 28 compounding periods (7 years times 4 periods per year).

The rate per period will be calculated as done below:

Interest rate per period=Nominal rate period per year                                    = 8%4                                    =2%

Now, it is needed to look for 28 periods value in the compound interest table, the factors used will be 20 and 8 periods at 2%.

Now, from the compound interest table, it can be seen that at the rate of interest of 2% and the compounding periods of 20, the factor at the intersection is 1

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