3 a) An investment of $11,550 is deposited for 3 years at 2.2% compounded monthly. At...

3 a)

An investment of $11,550 is deposited for 3 years at 2.2% compounded monthly. At this point, the interest rate is changed to 1.95% compounded semi-annually. The investment earns interest for 5 more years.

What is the value of FV₁?

Money is invested at 8.27% p.a. compounded semi-annually for 39 months.

What is the numerical value of n? State your answer with 6 decimals.

Solutions

Expert Solution

(a)

Compute the monthly interest rate, using the equation as shown below:

Monthly rate = Annual rate/ 12 months

= 2.2%/ 12 months

= 0.18333333333%

Hence, the monthly rate of interest is 0.18333333333%.

Compute the value of FV₁, using the equation as shown below:

Future value = Present value*(1 + Monthly rate)^Time

= $11,550*(1 + 0.00183333333)^36

= $11,550*1.06816216997

= $12,337.2730631

Hence, the value of FV₁ is $12,337.2730631.

Note: For part (b), please re-post part (b) separately.

jeff jeffy answered 2 years ago

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