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Using​ annual, semiannual, and quarterly compounding​ periods, (1) calculate the future value if ​$6000 is deposited initially at 9​% annual interest for 7 ​years, and​ (2) determine the effective annual rate ​(EAR​).

Using​ annual, semiannual, and quarterly compounding​ periods, (1) calculate the future value if ​$6000 is deposited initially at 9​% annual interest for 7 ​years, and​ (2) determine the effective annual rate ​(EAR​).

Essentials Of Investments
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
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Using​ annual, semiannual, and quarterly compounding​ periods, (1) calculate the future value if ​$6000 is deposited initially at 9​% annual interest for 7 ​years, and​ (2) determine the effective annual rate ​(EAR​).

Expert Solution
Step 1: Future values:

The worth of the amount is expected by an investor to be received on some future date for investing in the current date at given interest rate will be referred as future worth. This can be found by using the following equation:

F V equals P V asterisk times left parenthesis 1 plus r divided by t right parenthesis hat n t



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