Question

Problem 4-7 (add the formulas)
COMPOUND INTEREST AT NON-ANNUAL RATES
Given the annual interest rates below, and the compounding period indicated,
calculate the FUTURE VALUE for each item.
	Annual		Compounding
Present Amount (SAR)	Interest	Years	Period
20,000	6%	5	Semi-annually
42,000	4%	12	Quarterly
8,000	12%	4	Monthly

Answer 1

Present Amount	Number of times interest is compounded in a year	Rate for a period	Total Number of periods	Future value = Present value(1+i)^n
20000	2 [2semiannual period in a year comprising of 6 months each]	6 /2 = 3%	5*2 =10	20000(1+.03)^10 20000(1.03)^10 20000*1.34392 26878.4   (rounded to 26878)
42000	4 [4quarters in a year comprising of 3 months each]	4/4 = 1%	12*4= 48	42000(1+.01)^48 42000* 1.61223 67713.66 (rounded to 67714)
8000	12 [12 months in a year]	12/12= 1%	4*12=48	8000(1+.01)^48 8000* 1.61223 12897.84 (rounded to 12898)