   Chapter 11.II, Problem 16RE ### 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 11-2.How much must be invested today at 6% compounded quarterly to have $8,000 in 3 years? To determine To calculate: The present value (principal) that has total interest amount$8000 and quarterly interest of 6% over 3 years by using present value table.

Explanation

Given information:

The quarterly interest rate is 6% for 3 years and the compound amount is $8000. Formula used: Compounding period 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 present value (principal) can be calculated by the formula given below: Principal=Table factor×Compound amount In Present value table, the table factor is the intersection of the rate-per-period column and the number-of-periods row is the present value of$1 at compound interest.

Calculation:

Consider the compound amount \$8000 and quarterly interest of 6% over 3 years and solve as shown below:

Since, the variables-compound amount, time period (years), nominal rate and interest compounded are given; therefore, the compounding period can be calculated as below:

Compounding periods(

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