Question

PRINTER VERSION BACK NEXT stion 15 Find the future value of a five-year $124,000 investment that pays 7.25 percent and that has the following compounding periods: (Do not round Intermediate calculations, round final answers to 2 decimal places, e.g. 15.25.) Excel Template (Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy reference to the values you've been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of the problem.) Value of investment after 5 years a. Quarterly b. Monthly C. Daily d. Continuous Click if you would like to Show Work for this question: Open Show Work SAVE FOR LATER SUBMIT ANSWEI Question Attempts: 0 of 2 used 4:13 PM ^ E S 11/27/2019 n te @

Answer 1

Investment = $124,000 Interest rate = 7.25% Term = 5 Years a) Compounding quarterly Term = 5 Years * 4 = 20 Quarters Interest rate = 7.25% * 3/12 = 1.8125% Per quarter Future value = Investment * (1+I)n = $124,000 * (1 + 1.8125%) 20 = $124,000 * 1.43226056 = $177,600.3095 = $177,600.31 b) Compounding monthly Term = 5 Years * 12 = 60 Months Interest rate = 7.25%* 1/12 = 0.60416667% Per month Future value = Investment * (1+1) 'n = $124,000 * (1 + 0.60416667% 60 = $124,000 * 1.435350885 = $177,983.5098 = $177,983.51

c) Compounding daily Term = 5 Years * 365 = 1.825 days Interest rate = 7.25% * 1/365 = 0.019863014% Per day Future value = Investment * (1 + I n = $124.000 * (1 + 0.019863014%) 1825 = $124.000 * 1.436865497 = $178.171.3217 = $178,171.32 d) Compounding continuously Future value = Investment *e (I*n) = $124,000 *e (7.25%* 5) = $124.000 *e (0.3625) = $124.000 * 2.71828(0.3625) = $124.000 * 1.436916871 = $178.177.692 = $178,177.69 (here e = 2.71828)