Question

Compie Find the value of $20,000 at the end of one year if it is invested in an account that has an interest rate of 5.85% and is compounded in accordance with the rules below a. compounded monthly b. compounded daily (assuming a 365-day year) c. compounded quarterly a. What is the value if the money is compounded monthly? (Do not round until the final answer. Then round to the nearest cent as needed.) b. What is the value if the money is compounded daily? (Do not round until the final answer. Then round to the nearest cent as needed) c. What is the value if the money is compounded quarterly? (Do not round until the final answer. Then found to the nearest cant as needed) Enter your answer in each of the answer boxes

Answer 1

1 Present value $20,000 Term = 1 Year Interest rate = 5.85% a) If interest rate compounded monthly I = 5.85%* 1/12 = 0.4875% Per month Term, n = 1 Year * 12 = 12 Future value Present value *(1+1)'n = $20.000 *(1+0.4875%) 12 $20,000 * 1.060094 = $21,201.89 b) If interest rate compounded daily I = 5.85% * 1/365 = 0.016027% Per day Term = 365 days Future value = $20.000 *(1 +0.016027397%)^365 = $20.000 * 1.060240016 = $21.204.8 c)If interest rate compounded quarterly I = 5.85% * 1/4 = 1.4625% Per quarter Term.n = 1 Year * 4 = 4 Quarters Future value $20.000 *(1+1.4625%) 4 = $20.000 * 1.059795902 = $21.195.91804

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