Problema Solution
use the compound interest formulas A=P(1+ r/n)^nt and A=Pe^rt to solve the problem given. Round answers to the nearest cent.
Find the accumulated value of an investment of $25,000 for 7 years at an interest rate of 5.5% if the money is A.compounded semiannually; b.compunded quarterly; c.compounded monthly d.compounded continuously.
a. what is the accumulated value if the money is compounded semiannually?
b. What is the accumulated value if the money is compounded quarterly?
c. What is the accumulated value if the money is compounded monthly?
d. What is the accumulated value if the money is compounded continuously?
Answer provided by our tutors
P = $25,000
t = 7 years
r = 0.055 or 5.5% annual interest rate
A = future value (accumulated value)
a. what is the accumulated value if the money is compounded semiannually?
n = 2
A=P(1+ r/n)^(nt)
A = 25000(1 + 0.055/2)^(2*7)
A = $36,549.85
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b. What is the accumulated value if the money is compounded quarterly?
n = 4
A=P(1+ r/n)^(nt)
A = 25000(1 + 0.055/4)^(4*7)
A = $36,644.12
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c. What is the accumulated value if the money is compounded monthly?
n = 12
A=P(1+ r/n)^(nt)
A = 25000(1 + 0.055/12)^(12*7)
A = $36,708.06
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d. What is the accumulated value if the money is compounded continuously?
A=Pe^rt
A = 25000*e^(0.055*7)
A = $36,740.36
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