   Chapter 11.I, Problem 4TIE ### 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

# Jill Quinn invested $7,000 in a certificate of deposit for 1 year at 6% interest compounded quaterly. What is the compound amount, compound interest, and annual percentage yield of Jill’s investment? Round the APY to the nearest hundredth of a percent. To determine To calculate: The compound amount, compound interest and annual percentage yield for the investment of$7,000 with 6% compounded interest for 1 year quarterly.

Explanation

Given Information:

Jill has invested an amount $7,000 at 6% interest compounded quarterly for 1 year. Formula used: The formula for compound interest can be seen as given below: Compound interest=Compound amountprincipal 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. In order to find the compound amount first calculate the table factor. The Table factor is calculated from the compound interest table where the interest rate per period is calculated as done below: Interest rate per period=Nominal ratePeriod per year =6%4 =1.5% Similarly, for calculating the compounding periods, it is calculated as done below: Compounding periods=Years×Periods per year =1×4 = 4 Now, look at the compound interest table with the interest rate of 1.5% and 4 periods, the value will be 1.06136. The compounding amount is calculated by the formula given below: Compounding amount=Table factor× principal =1.06136×7,000 =$7,429

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