   Chapter 11.II, Problem 17RE ### 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.Samantha Wimberly is planning a vacation in Europe in 4 years, after graduation. She estimates that she will need $3,500 for the trip.a. If her bank is offering 4-year certificates of deposit with 8% interest compounded quarterly, how much must Samantha invest now to have the money for the trip?b. How much compound interest will be earned on the investment? (a) To determine To calculate: The present value (principal) for an investment with compound amount$3,500 is made for 4 years at 8% interest compounded quarterly using the table 11-2. Also, round your answer to the nearest cent.

Explanation

Given information:

An investment with compound amount $3,500 is made for 4 years at 8% interest compounded quarterly. 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 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 present value (principal) can be calculated by the formula given below: Principal=Table factor×Compound amount In table 11-2, 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

(b)

To determine

To calculate: The compound interest for an investment with compound amount \$3,500 is made for 4 years at 8% interest compounded quarterly. Also, round your answer to the nearest cent.

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