Ezample 1. - Find the compound amount after 1 year if $100 is in vested at the rate 8%, compounded quarterly. Solution.-The rato per conversion period is .02. Original prinoipal is $1001 At end of 3 mo. $2.000 interost is due; new principal is $102.000. ` At end of 6 mo. $2.040 interost is due; new principal is $104.040. At end of 9 mo. $2.081 interest is due; new principal is $106.121. At end of 1 yr. $2,122 intereat in du; new principal is $108.243. The compound interest earned in 1 year is $8.243. The rate of increase ow principal par year is 8.243 100 - .08243, or 8.243%.
Ezample 1. - Find the compound amount after 1 year if $100 is in vested at the rate 8%, compounded quarterly. Solution.-The rato per conversion period is .02. Original prinoipal is $1001 At end of 3 mo. $2.000 interost is due; new principal is $102.000. ` At end of 6 mo. $2.040 interost is due; new principal is $104.040. At end of 9 mo. $2.081 interest is due; new principal is $106.121. At end of 1 yr. $2,122 intereat in du; new principal is $108.243. The compound interest earned in 1 year is $8.243. The rate of increase ow principal par year is 8.243 100 - .08243, or 8.243%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Ezample 1. - Find the compound amount after 1 year if $100 is in-
vested at the rate 8%, compounded quarterly.
Solution.- The rate per conversion period is .02. Original prinoipal is $100.
At end of 3 mo. 82.000 interest is due; new principal is $102.000.
At end of 6 mo. $2.040 interest is due; new principal is $104.040.
At end of 9 mo. $2.081 interest is due; new principal is $106.121.
At end of 1 y. $2.122 interest is due; new principal is $108.243.
The compound interest earned in 1 year is $8.243. The rate of increase of
8.243
principal per year is
100
.08243, ar 8.243%.
Transcribed Image Text:1. By the method of Example 1 find the compound amount after 1 year
if $100 is invested at the rate 6%, payable quarterly. What was the
compound amount after 6 months? At what rate per year does principal
increase in this case?
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