trinity hs invested $8,800 in a savings certificate paying a guaranteed rate of 4.28% compounded quarterly...

trinity hs invested $8,800 in a savings certificate paying a guaranteed rate of 4.28% compounded quarterly for a term of eight years.

1. find the interest rate per conversion interval.

2. find the future value of the investment at the end of eight years.

3. find the total interest earned over the eight years.

4. set up the expression for finding an effective annual rate of 4.28% compounded quarterly and evaluate the expression.

Solutions

Expert Solution

1. Interest Rate per period =4.28%/4 =1.07%

2. PV =8800
Number of months =8*12 =96
FV of investment at the end of 8 years =PV*(1+r)^n =8800*(1+1.07%)^96=24446.70

3. Total interest =FV-PV =24446.70-8800 =15646.70

4. EAR=(1+APR/n)^n-1 =(1+4.28%/4)^4-1 =4.35%

jeff jeffy answered 2 years ago

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