+598 An investment of $2500 earns interest at 4.5% p.a compunded monthly for three years. At that time the interest rate is changed to 5% compounded quarterly. How much will the accumulated value be one-and-a-half years after the change?
Any help would be great!
+128707 The amount accumuated before the change is :
A = 2500(1 + .045 / 12)^(3 * 12) = $2860.62
After the change, we have
A = 2860.62 ( 1 + .05/ 4)^(1.5 * 4) = $3081.98
1- At the end of three years, $2,500=$2,860.62
2-At the end of 1 1/2 years @5% =$3,081.98
P.S. If you need the formulae used, just let me know.
Since it is initially compounded MONTHLY, you'll need to calculate the MONTHLY interest rate
4.5/12 =.375 % per MONTH
It is compunded for THREE years which is 36 MONTHS
at the end of three years (36 months) the value would be:
2500 (1.00375)^36 = 2860.62
THEN the interest rate is chanded to 5% compaounded QUARTERLY
NOW, youll need to find the QUARTERLY interest rate as we did above for the MONTHLY.....do you know how to do that???
then the new stating amount is 2860.62 and the number of periods will be? ( ans: 1 1/2 yrs =6 quarters)......can you figure it out now???
