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Unformatted text preview: me) ( ) Example:
Suppose $10,000 is invested at an annual rate of 5% for 10 years. Find
the future value if interest is compounded as follows.
(a)
(b)
(c)
(d)
(e) annually,
quarterly,
monthly,
daily, and
continuously. Based on custom edition “Math: Applications for Business.”
Prepared and summarized by Vera Klimkovsky. Mathematics of Finance Compound Interest Solution:
, , . a) annually m = 1
b) quarterly, m = 4
c) monthly, m = 12
d) daily, m = 365
e) continuously
Practice Exercises
1. Find the compound amount for the following deposit:
$470 at 10% compounded semiannually for 12 years. Mathematics: Applications for Business 2. Find the amount of interest earned by the following deposit:
$5124.98 at 6.3% compounded quarterly for 5.2 years.
3. Find the compound amount if $25,000 is invested at 6%
compounded continuously for 15 years.
4. Find the present value of the following future amount:
$4253.91 at 6.8% compounded semiannually for 4 years.
Applications
Problem
Bill Poole wants to have $20,000 available in 5 years
for a down payment on a house. He has inherited
$15,000. How much of the inheritance should he
invest now to accumulate the $20,000, if he can get
an interest rate of 8% compounded quarterly? Based on custom edition “Math: Applications for Business.”
Prepared and summarized by Vera Klimkovsky....
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This note was uploaded on 10/19/2011 for the course MATH 110 taught by Professor Staff during the Spring '11 term at S.F. State.
 Spring '11
 Staff
 Math, Calculus

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