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Problem 4-16 Future Value for Various Compounding Periods Find the amount to which $550 will grow under...

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Finance

Problem 4-16
Future Value for Various Compounding Periods

Find the amount to which $550 will grow under each of thefollowing conditions. Do not round intermediate calculations. Roundyour answer to the nearest cent.

  1. 3% compounded annually for 5 years
    $   
  2. 3% compounded semiannually for 5 years
    $   
  3. 3% compounded quarterly for 5 years
    $   
  4. 3% compounded monthly for 5 years
    $  

Answer & Explanation Solved by verified expert
3.7 Ratings (504 Votes)

a.
A = P*(1+i)^n Where,
= 550*(1+0.03)^5 A Future value
= $ 637.60 P $        550
i 3%
n 5
b.
A = P*(1+i)^n Where,
= 550*(1+0.015)^10 A Future value
= $ 638.30 P $        550
i 3% / 2 = 0.015
n 5 x 2 = 10
c.
A = P*(1+i)^n Where,
= 550*(1+0.0075)^20 A Future value
= $ 638.65 P $        550
i 3% / 4 = 0.0075
n 5 x 4 = 20
d.
A = P*(1+i)^n Where,
= 550*(1+0.0025)^60 A Future value
= $ 638.89 P $        550
i 3% / 12 = 0.0025
n 5 x 12 = 60

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