   Chapter 11.I, Problem 40RE ### 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

# The FernRod Motorcycle Company invested $250,000 at 4.5% compounded monthly to be used for the expansion of their manufacturing facilities. How much money will be available for the project in 3 1 2 years? To determine To calculate: The available money for the project when investment has the principal$250,000 for time period 3.5 years at the rate interest 4.5% compounded monthly.

Explanation

Given information:

An investment with the principal $250,000 is made for 3.5 years at 4.5% compounded monthly. Formula used: Compounding period can be defined as the duration or length of time from one interest payment to the next. If an investment made for 4 years at 6% compounded annually (once per year) then it would have four compounding periods which can be calculated by the 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: A=P×(1+i)n Here, P is the principal, i is the rate per period and n is the compounding period. Calculation: Consider the statement as “An investment with the principal$250,000 is made for 3.5 years at 4.5% compounded monthly.” and solve as below:

Since, the variables- principal, the time period in years,

Nominal rate and interest compounded are given (In monthly compounding, m=12)

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