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Question 12 Suppose Jack invests $6,000 today at 5% p.a compounding quaterly for the first 3...

Question 12

Suppose Jack invests $6,000 today at 5% p.a compounding quaterly for the first 3 years, then the interest rate changes to 10%p.a compounding monthly for the next 3 years. What is the value of the investment at the end of the 6 years? (round to the nearest dollar; don't use $ sign or commas)

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Answer #1

Answer:

Interest Rate for first 3 years = 5% p.a. compounding quarterly

Principal Amount = $6,000

Amount at the end of 3 years = 6,000(1+0.0125)^12

= $6,964.527

Interest Rate for the next 3 years = 10% p.a. compounding monthly

Amount at the end of 6 years = 6,965(1+0.0083)36

= $9,378.92 (approx.)

i.e. $9,379

correct answer is 9379

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