Question 1172572: Suppose that you invest $7,000 at 6% interest, compound quarterly, for 5 years. use Table 11-1 to calculate the compound interest (in $) on your investment.
Found 3 solutions by ewatrrr, Theo, MathTherapy:
Answer by ewatrrr(24785)   (Show Source):
Answer by Theo(13342)  (Show Source):
You can put this solution on YOUR website! i don't know what table 11-1 is, but, .....
if you use the formula of f = p * (1 + r) ^ n, where, .....
f = future value
p = present value
i = interest rate per time period.
n = number of time periods, .....
you would do the following:
p = 7000
i = 6% per year / 4 = 1.5% per quarter / 100 = .015 per quarterly time period.
n = 5 years * 4 = 20 quarterly time periods.
formula becomes:
f = 7000 * (1 + .015) ^ 20 = 9427.985046
subtract 7000 from that to get total interest of 2417.985046.
the factor for 6% compounded quarterly for 5 years should be equal to:
(1 + .06/4) ^ (5 * 4) - 1 = .3466855007, probably rounded to a smaller number of decimal digits.
using that factor, i would get interest of 7000 * .3466855007 = 2427.985046.
this is the same as i got above, as it should be, because i'm using the same formula to find the interest factor.
i looked for a compound interest table on the web and i found one at https://global.oup.com/us/companion.websites/9780199778126/pdf/Appendix_C_CITables.pdf
i don't know if that 's the same as you're using, but it it a compound interest table.
looking at this table, i took the 6% per year and divided it by 4 to 1.5% per quarter.
i then took 5 years and multiplied it by 4 to get 20 quarters.
i then looked into the table for 1.5% with n = 20 and got a factor of 1.347
this is the same as the factor that i calculated above, which i reproduced below.
the factor for 6% compounded quarterly for 5 years should be equal to:
(1 + .06/4) ^ (5 * 4) - 1 = .3466855007, probably rounded to a smaller number of decimal digits.
if you add the 1 back in, you get 1.3466855007.
this is the growth factor that is equal to 1.347 in the table.
that's your future value factor.
the interest part of that is after you subtract 1 from the factor to get .347.
here's a picture of the table that i found.
the interest rate is 1.5%
n = 20
that's your growth factor.
your interest factor is that minus 1.
you're in the single payment section as shown below:
you're looking at the growth factor for 1.5% for 20 time periods (n = 20) as shown below.
i'll be available to answer any questions you might have about this.
theo
Answer by MathTherapy(10555)  (Show Source):
You can put this solution on YOUR website!
Suppose that you invest $7,000 at 6% interest, compound quarterly, for 5 years. use Table 11-1 to calculate the compound interest (in $) on your investment.
And how is anyone here supposed to get a hold of Table 11-1?
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