Unformatted text preview: rate. To calculate, use the future value formula with P = $100 and t = 1 ; subtract $100 from the end answer. Find the effective rate of interest for 9¼% compounded: 7. quarterly 8 semiannually In the examples 5 and 6, the 9.25% is the nominal rate and the 9.58 or 9.46% is the effective yield. The same result can be gotten with the formula 1 1 n r Y n = + ÷ and converting the decimal result to a percent. 9. At the time of a child’s birth, his grandparents deposit $15,000 into a mutual fund with an average yield of 8% a year compounded semiannually. [a] How much will be in the fund on the child’s 21 st birthday? [b] How much should they have invested for the or [c] What average yield on their $15,000 would child to receive $100,000 on his 21 st birthday? have resulted in $100,000?...
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 Fall '11
 PatriciaBishop
 7 years, 8%, $25,000, 9.25%

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