   Chapter 12.I, Problem 12RE ### 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 exercises by using Table 12-1.Suntech Distributors, Inc. deposits $5,000 at the beginning of each 3-month period for 6 years in an account paying 8% interest compounded quarterly.a. How much will he in the account at the end of the 6-year period?b. What is the total amount of interest earned in this account? (a) To determine To calculate: The value of account at the end of 6 years where regular deposit is$5,000, frequency of payment is 3 months, time duration is 6 years, nominal rate of return is 8% and interest is compounded quarterly.

Explanation

Given Information:

Regular deposit is $5,000, frequency of payment is 3 months, time duration is 6 years, nominal rate of return is 8% and interest is compounded quarterly. Formula used: Steps for calculating the future value of an annuity due are: Step 1: First the periods of the annuity of must be calculated. Step 2: The interest rate per period must be calculated. Step 3: Use table 12-1 to locate the ordinary annuity table factor that lies on the intersection of the rate-per period column and number-of-periods row. Step 4: The number 1.00000 must be subtracted from the ordinary annuity table in order to get the annuity due factor. Step 5: Finally calculate the future value of the annuity due. The formula to compute the future value of ordinary annuity is, Future Value=Annuity due table factor×Annuity payment Annuity due table factor=Ordinary annuity table factor1.00000 Calculation: Consider that regular deposit is$5,000, frequency of payment is 3 months, time duration is 6 years, nominal rate of return is 8% and interest is compounded quarterly.

As the interest is compounded quarterly. So, the interest rate period is;

8%4=2%

The rate period is 2%

(b)

To determine

To calculate: The amount of total interest where regular deposit is \$5,000, frequency of payment is 3 months, time duration is 6 years, nominal rate of return is 8% and interest is compounded quarterly.

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