Question

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3) On July 15th, 2013, $800 was invested in an account paying 10% compounded semiannually. Then...

3) On July 15th, 2013, $800 was invested in an account paying 10% compounded semiannually. Then on July 15, 2017 the money was reinvested in an account paying 8% compounded daily. Determine the balance on October 20, 2017 using the Banker's Rule.

Expert Solution

Step-1:Calculation of investment value on July 15, 2017

Future value

=

P*(1+i)^n

Where,

=

800*(1+0.05)^8

P

Amount at the beginning of period

=

$ 800

=

$ 1,181.96

i

Discount rate

=

10%/2

=

0.05

n

Number of period

=

4*2

=

8

Step-2:Calculation of investment value on October 20, 2017

Future value

=

P*(1+i)^n

Where,

=

$ 1,207.36

P

Amount at the beginning of period

=

$ 1,182

i

Discount rate

=

8%/365

=

0.0002192

n

Number of period

=

4*2

=

97

(16+31+30+20)

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