I am investing $15,000 today in an account providing 8% annual interest compounded quarterly. Identify the...

I am investing $15,000 today in an account providing 8% annual interest compounded quarterly. Identify the details below that I need in order to determine how much money I will have in 3 years.

What table must I use to find the relevant factor?

Future value of single-sum
Present value of single-sum
Future value of ordinary annuity
Present value of ordinary annuity

What is the interest rate to find the relevant factor?

What are the number of periods (n) to find the relevant factor?

What is the factor?

Solutions

Expert Solution

Answer :

given information

Present invetment as on today =$15,000

Investment is for 3 Years(Single investment as on today but maturity is 3 years from today)

Interest Rate per annum =8%

the above interest is compounded quarterly.It means 2%(8%/4 quarters)

One quarter is 2%

Total number of periods =4 quarters*3 years=12 periods

From the above data

What table must I use to find the relevant factor ?

Future value of single-sum.Because single investment as on today waiting for 3 years(no annuity).Future value of single sum factor should be used

What is the interest rate to find the relevant factor?

Interest rate is 2%.Interest rate of 2% is used for finding relevant .Because 8% per annum interest is compounded quarterly means 8% shold divided by 4 quarters anser is 2%

What are the number of periods (n) to find the relevant factor?

Total number of periods =4 quarters*3 years=12 periods

What is the factor ?

Future VAlue of SIngle sum @2 % interest in Future Value Factors =12 times Multiplication of (1+0.02)

=1.2682

So after 3 years you have $15,000*1.2682.i.e $19,023

ekkarill92 answered 1 year ago

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