Explanation Given information: An investment with principal $ 2800 is made for 2.5 years at 3.1 % 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 rate Period per year The compound amount (Future value) can be calculated by the formula given below: A = P × ( 1 + i ) n Here, P is the principal, i is the rate per period and n is the compounding period. The compound interest can be calculated by the formula given below: Compound interest = Compound amount − Principal Calculation: Consider the investment with principal $ 2800 is made for 2.5 years at 3.1 % compounded quarterly and solve as shown below: Since, the variables-principal, time period (years), nominal rate and interest compounded are given; therefore, the compounding period can be calculated as below: Compounding periods ( n ) = Term of investments ( years ) × m = 2.5 × 4 ( In quarterly compounding, m = 4 ) = 10 Calculate the interest rate per period as below: Interest rate per period = Nominal rate Period per year ( m ) = 3

Contemporary Mathematics for Business & Consumers

8th Edition

ISBN: 9781305585447

Author: Robert Brechner, Geroge Bergeman

Publisher: Cengage Learning

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Chapter 11.I, Problem 37RE

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To calculate: The compound amount and the compound interest for the investment with principal $2800 is made for 2.5 years at 3.1% compounded quarterly by using compound interest formula.

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Chapter 11.I, Problem 36RE

Chapter 11.I, Problem 38RE

Chapter 11 Solutions

Contemporary Mathematics for Business & Consumers

Ch. 11.I - Gail Parker invested $10,000 at 6% interest...Ch. 11.I - Jenny Chao invested $20,000 at 6% interest...Ch. 11.I - Prob. 3TIE Ch. 11.I - Jill Quinn invested $7,000 in a certificate of...Ch. 11.I - Prob. 5TIE Ch. 11.I - Prob. 1RE Ch. 11.I - For the following investments, find the total...Ch. 11.I - For the following investments, find the total...Ch. 11.I - Prob. 4RE Ch. 11.I - Prob. 5RE

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The compound amount and the compound interest for the investment with principal $ 2800 is made for 2.5 years at 3.1 % compounded quarterly by using compound interest formula.

Solution Summary: The author calculates the compound amount and compound interest for the investment with principal 2800. The compounding period is defined as the duration or length of time from one interest payment to the next.

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To calculate: The compound amount and the compound interest for the investment with principal $2800 is made for 2.5 years at 3.1% compounded quarterly by using compound interest formula.

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Chapter 11 Solutions