An amount of $5,000 is invested on 2 December 2020 at 6% pa compounded quarterly. Calculate...

An amount of $5,000 is invested on 2 December 2020 at 6% pa compounded quarterly. Calculate the interest (I) earned between 2 December 2024 and 2 December 2027. Give your answer in dollars and cents to the nearest cent.

Solutions

Expert Solution

Rate = 6% per annum

Rate per quarter = 1.5%

Value of investment on 2nd December 2024:

Total number of quarters between 2nd December 2020 and 2nd December 2024 = 4 years * 4 quarters per year = 16 quarters

Effective Annual Rate = 1.015 ^ (number of quarters) -1

= 1.015^16 -1 = 1.26898-1 = 26.898% (Effective annual rate is the rate which converts the compounded rate to annual interest rate)

Value of the investment on 2nd December 2024 = 5000 * (1.26898) = $6344.927738

Value of investment between 2nd December 2024 and 2nd December 2027:

Total number of quarters between above dates : 3*4 = 12 quarters

Effective Annual Rate = 1.015^12 -1 = 1.195618-1 = 19.5618%

Value of investment on 2nd December 2027

= 6344.927738*1.195618 =7586.1109

Interest earned between 2nd December 2027 and 2nd December 2024 =7586.1109 -6344.927738 = $1241.183162 Answer

Interest earned = $1241.183162

Please let me know in case you have any queries and I would be happy to assist you.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

How long will it take for $1,000 to amount to $10,000 if invested at 6% compounded...

How long will it take for $1,000 to amount to $10,000 if invested at 6% compounded monthly? Express the answer in years, rounded to two decimal places

How long will it take 1,000 to amount to 1,346.00 ifinvested in 6% compounded quarterly?

How long will it take 1,000 to amount to 1,346.00 if invested in 6% compounded quarterly?

Money is invested at 12.30% p.a. compounded quarterly for 22 months.

a) Money is invested at 12.30% p.a. compounded quarterly for 22 months.What is the numerical value of CY?b) What principal value will grow to $4334 if invested for 6 years at 7.04% p.a. compounded annually? State your answer indollars ($) with two decimals.c)Money is invested at 3.51% p.a. compounded semi-annually for 5 years and 8 months.What is the numerical value of n? State your answer with 6 decimals.

An investment of $13,000 was growing at 4.5% compounded quarterly. a. Calculate the accumulated value of...

An investment of $13,000 was growing at 4.5% compounded quarterly. a. Calculate the accumulated value of this investment at the end of year 1. Round to the nearest cent b. If the interest rate changed to 5% compounded monthly at the end of year 1, calculate the accumulated value of this investment at the end of year 5. Round to the nearest cent c. Calculate the amount of interest earned from this investment during the 5-year period.

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.

Sarah has invested $7,800 in a savings certificate paying a guaranteed rate of 4.28% compounded quarterly...

Sarah has invested $7,800 in a savings certificate paying a guaranteed rate of 4.28% compounded quarterly for a term of eight years. Note this is a single payment. a. Find the interest rate per conversion interval. b. Find the future value of the investment at the end of eight years. . c. Find the total interest earned over the eight years. d. Set up the expression for finding the effective annual rate (EAR) of 4.28% compounded quarterly and evaluate the...

If 25,000 is invested into an account paying 4.5% per year, compounded quarterly, how much money...

If 25,000 is invested into an account paying 4.5% per year, compounded quarterly, how much money can be withdrawn from the account every two month for the next 6 years

a) Suppose $600 is invested at 5% interest, compounded quarterly for 2.5 years. How much money...

a) Suppose $600 is invested at 5% interest, compounded quarterly for 2.5 years. How much money is in the account after 2.5 years? b) How much shoukd you pay each year for 15 years into an ordinary annuity that pays 3.15% interest compunsed annually so that at the end, you have $43,000 in the account? c) A building manager sets up a sinking fund so that there is enough money when the HVAC system needs to be replaced in 6...

If 6,000 is invested at 8% compounded countinously, what is the amount after 4 years? the...

If 6,000 is invested at 8% compounded countinously, what is the amount after 4 years? the answer is 8,262.77 but i want to see how to solve it!

How long will it take money to double if it is invested at 6% compounded monthly?...

How long will it take money to double if it is invested at 6% compounded monthly? 5.3% compounded continuously?

Subjects