Question

In: Accounting

Mr Usiku invested N$ 6000 in a fixed deposit account with the Global bank for the three years at the rate of interest of 15% p.a.

Mr Usiku invested N$ 6000 in a fixed deposit account with the Global bank for the three years at the rate of interest of 15% p.a.
a) How much will Mr Usiku receive upon maturity if interest is compounded bi- annually?
b) How much will Mr Usiku receive upon maturity if interest is compounded quarterly?

Solutions

Expert Solution

The amount to be received [Future value of the deposit] is
given by: FV = 6000*(1+r/m)^(m*n)
where, r = annual rate of interest, m = number of compoundings
per year and n = number of years
a] Future value = 6000*(1+0.15/2)^6 = $      9,259.81
b] Future value = 6000*(1+0.15/4)^12 = $      9,332.73

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