Question

Fill this

You deposit $300 in an account earning 4% compound interest for 3 years. Find the future value and the interest earned for each of the following compounding frequencies. Round all answers to two decimal places if necessary. PY C/Y N I/Y Frequency Annually: Semiannually: % Quarterly: % Monthly: Daily: % Frequency PV PMT FV Interest Earned Annually: $ $ $ Semiannually: $ $ $ Quarterly: $ $ $ Monthly: $ $ $ $ Daily: $ $ $ $

Answer 1

Answer

Computation of Future value and the interest earned for each of the following compounding frequencies:

Future value = Present value*(1+i/m)^(n*m)

where,

n - number of years

m - frequency of compounding in a year

i - rate of interest

Compound Interest =  = P [(1 + i)ⁿ – 1]

where,

P = Principal,

i = nominal annual interest rate in percentage terms

n = number of compounding periods.

Frequency	P/Y	C/Y	N	I/Y
Annually	1	1	3	4%
Semiannually	1	2	3	4%
Quartely	1	4	3	4%
Monthly	1	12	3	4%
Daily	1	365	3	4%

Where,

N – time in years (for compound interest calculations) OR number of payments made during the term of the annuity (for annuity calculations)

I/Y – nominal annual rate of interest per year (entered as a %; NOT a decimal)

C/Y – number of interest compounding periods per year

P/Y – number of payment periods per year

Frequency	PV	PMT	FV	Interest Earned
Annually	$300.00	$0.00	$337.46	$37.46
Semiannually	$300.00	$0.00	$337.85	$37.85
Quartely	$300.00	$0.00	$338.05	$38.05
Monthly	$300.00	$0.00	$338.18	$38.18
Daily	$300.00	$0.00	$338.25	$38.25

Where,

PV – present value (the amount of money at the beginning of the transaction.)

PMT – Periodic deposit amount

FV – future value (money at the end of the transaction.)