SOLUTION: Complete the following without using Table12.1. (Round the "Total amount" and "Total interest" to the nearest cent.)
Principal Time
(years) Rate of
compound
interest Compounded
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-> SOLUTION: Complete the following without using Table12.1. (Round the "Total amount" and "Total interest" to the nearest cent.)
Principal Time
(years) Rate of
compound
interest Compounded
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Question 1150116: Complete the following without using Table12.1. (Round the "Total amount" and "Total interest" to the nearest cent.)
Principal Time
(years) Rate of
compound
interest Compounded Periods Rate Total amount Total interest
$1,360 1 10 % Quarterly %
principal = $1,360.
time is 1 year.
interest rate is 10% per year.
interest rate is compounded quarterly.
you want to know the total amount (future value).
you also want to know the total interest.
the formula to use if f = p * (1 + r) ^ n
p is the present value (this is the principal)
f is the future value (this is the principal plus interest).
r is the interest rate per time period.
n is the number of time periods.
in this formula, you use the interest rate, not the interest rate per cent.
the yearly interest rate is 10% / 100 = .10
to find the quarterly interest rate, you divide the yearly interest rate by 4 to get .10 / 4 = .025.
to find the number of quarters, you multiply the number of years by 4 to get 4.
the formula of f = p * (1 + r) ^ n becomes f = 1360 * (1 + .025) ^ 4 = 1501.185531.
that is the future value which is the total amount at the end of the investment period you are looking for.
subtract the initial investment from this to get the interest rate that was earned.
that is equal to 1501.185531 - 1360 = 141.185531.
rounded to the nearest penny, your total amount is $1501.19 and your total interest is $141.19.
the yearly calculations are shown in the following excel printout.
