In: Finance
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?
b)
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.
(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.