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# Answer to Question #138143 in Finance for CH Tan

Question #138143
Assume that your friend purchase a 6-year, 8 percent savings certificate for $1,000. If interest is compounded annually, what will be the value of the certificate when it matures? What is the difference between the ending value of the savings certificate compounded semi-annually and the one compounded annually? 1 Expert's answer 2020-10-15T02:53:29-0400 solution Compounded annually Principal "P= 1000" Rate "r=0.08" Period "n = 6" "A = P (1+r)^n""1000 (1.08)^6 = 1586.8743" answer:$ 1,586.8743

When compounding semi annually

Rate, "r=\\frac{0.08}{2}=0.04"

Period, "n=6*2=12"

"A=1000 (1.04)^{12}= 1601.0322"

Difference between semi annual and annual compounding:

"1601.0322-1586.8743 = 14.1579"

answer: when compounding semi annually, the accumulated amount exceeds the amount compounded annually by \$ 14.1579

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