Question

VIVEN. U-Z vyrmanceLab Assignment Score: 0 of 4 pts P5-6 (similar to) (Related to Checkpoint 5.2) (Compound interest with non-annual periods) You just received a bonus of $3,000 a. Calculate the future value of $3,000, given that it will be held in the bank for 6 years and earn an annual interest rate of 4 percent. b. Recalculate part (a) using a compounding period that is (1) semiannual and (2) bimonthly c. Recalculate parts (a) and (b) using an annual interest rate of 8 percent. d. Recalculate part (a) using a time horizon of 12 years at an annual interest rate of 4 percent e. What conclusions can you draw when you compare the answers in parts (c) and (d) with the answers in parts (a) and (b)? a. What is the future value of $3,000 in a bank account for 6 years at an annual interest rate of 4 percent? $ (Round to the nearest cent.)

Answer 1

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PV, FV, ANNUITY (Autosaved) - Microsoft Excel (Product Activation Failed) Review View Add-Ins File Home Insert Page Layout Formulas Data - 2x % Cut Calibri 11 A = = = V General A A Wrap Text Merge & Center - BIU - D $ % , :.: Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format Σ AutoSum : A Fill Sort & 2 Clear Filter Editing Find & Select Alignment Number Cells Font Fax H M E Copy Paste Format Painter Clipboard K476 F 460 A 461 462 463 464 3000 PRESENT VALUE YEARS RATE FUTURE VALUE 4% 3795.96 (=FV(H462,H461,,-H460)] 3000 465 B 466 467 468 PRESENT VALUE YEARS RATE SEMI ANNUAL RATE NO OF PERIODS FUTURE VALUE 4% 2.00% [4%/2] 12 [6X2] 3804.73 [=FV(H468, H469,,-H465)] 469 3000 470 471 472 473 474 475 476 477 478 KE Rea PRESENT VALUE YEARS RATE BIMONTHLY RATE NO OF PERIODS FUTURE VALUE 4.00% 0.666667% [4%/6] 36 [6 X 6] 3810.71 (=FV(H475,H476,-H472)] CAP STRU VALUE profit margin_loan with points LOCK BOX DILUTION DOLLAR COST AVG CALCULATOR LOAN OPTIONS pv, fv, annuity ferences: X262 EXPONPER APR CPI ear FVAPI 301 130% POR * 4 OENG 01-12-2019

PV, FV, ANNUITY (Autosaved) - Microsoft Excel (Product Activation Failed) Review View Add-Ins File Home Insert Page Layout Formulas Data - 2x % Cut Calibri A = = = V General A A Wrap Text FMerce Merge & Center - Center Σ AutoSum : A Fill Z Sort & B I U E E E s $ -% % 4.0 .00 . Insert Delete Format 11 B- Font Fax Conditional Format Formatting as Table Styles Cell Styles E Copy Paste Format Painter Clipboard J494 2 Clear Find & Select Filter Editing Alignment Number Cells H M 3000 PRESENT VALUE YEARS RATE FUTURE VALUE 8.00% 4760.62 (=FV(H482,4481,,-H480)] 480 C 481 482 483 484 485 486 487 PRESENT VALUE 3000 YEARS 8% 488 RATE SEMI ANNUAL RATE NO OF PERIODS FUTURE VALUE 489 4.00% 12 4803.10 (=FV(H488, H489,,-H485)] 490 3000 PRESENT VALUE YEARS RATE 491 492 493 494 495 496 497 498 W Rea BIMONTHLY RATE NO OF PERIODS FUTURE VALUE 8.00% 1.333333% 36 4832.87 (=FV(H495, H496,,-H492)] CAP STRU VALUE profit margin_loan with points LOCK BOX DILUTION DOLLAR COST AVG CALCULATOR LOAN OPTIONS pv, fv, annuity ferences: X262 EXPONPER APR CPI ear FVAPI BO 130% E R 9 * * - D ENG 01-12-2019

PV, FV, ANNUITY (Autosaved) - Microsoft Excel (Product Activation Failed) Review View Add-Ins File Home Insert Page Layout Formulas Data - 2x % Cut Calibri 11AA = = = Dr Wrap Text General BIU D - - A- ES E E Merge & Center $ % 48.08 Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles E Copy Paste Format Painter Clipboard H516 Σ AutoSum : A Fill Sort & 2 Clear Filter Editing Find & Select Alignment Number Cells Font fax G H M 499 500 D 3000 12 501 502 PRESENT VALUE YEARS RATE FUTURE VALUE 4% 4803.10 [=FV(H502,H501,,-H500)] 503 504 505 E 506 507 IF INTEREST RATE IS COMPOUNDED SEMI ANNUAL, IT WILL HAVE HIGHER AMOUNT THAN COMPOUNDED ANNUALLY IF INTEREST RATE IS COMPOUNDED BIMONTHLY, IT WILL HAVE STILL HIGHER AMOUNT THAN COMPOUNDED SEMI-ANNUALLY SO HIGHER COMPOUNDING INCREASES THE FUTURE VALUE FASTER 508 509 NOW IF RATE IS DOUBLED, IT WILL HAVE MORE MULTIPLICATIVE EFFECT THAN LOWER RATES AND LASTLY, IF PERIOD IS DOUBLED, IT WILL INCREASE AMOUNT MUCH FASTER AS LONGER THE PERIOD, LONGER THE MULTIPLICATIVE EFFECT 510 511 512 513 514 515 516 BUT PERIOD HAS MORE BIGGER EFFECT THAN RATE 517 CAP STRU VALUE profit margin_loan with points LOCK BOX DILUTION DOLLAR COST AVG KE Rea CALCULATOR LOAN OPTIONS pv, fv, annuity ferences: X262 EXPONPER APR CPI ear FVAPI BOJ 130% E R 9 * * O D ENG 01-12-2019