In: Finance
Juan Garza invested $111,000 3 years ago at 16 percent, compounded quarterly. How much has he accumulated? Use Appendix A for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Formula:
Compute the interest rate if compounded quarterly using the equation as shown below:
Interest rate compounded quarterly = Annual rate / Number of quarters per year
= 16% / 4
= 4%
Hence, the interest rate if compounded quarterly is 4%.
Compute the period using the equation as shown below:
Period = Number of years * Number of quarters per year
= 3 * 4
= 12
Hence, the number of periods is 12.
Compute the total amount in 4 years using the equation as shown below:
Total amount = Invested amount * ( 1 + Rate) ^(Period)
= $111,000 * ( 1 + 4%) ^(12)
=$177714.5763
Hence, the total amount is $177,714.5763.
Using a Financial Calculator:
First, enter the number of periods which is 12, and then press N.
Then enter interest rate if compounded quarterly that is 4 and press I /Y
Then enter the invested amount in negative that is -$111,000 and then press CPT and then press FV.
The answer arrived would be $177,714.5763.