FINANCE

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You deposit $2,000 in an account that pays 8% interest compounded semiannually. After 4 years, the interest rate is increased to 8.28% compounded quarterly. What will be the value of the account after 4 more years? (Do not round until the final answer. Then, round to the nearest cent.)

  • FINANCE -

    Pt = Po(1+r)^n.

    r = (8%/2) / 100% = 0.04 = Semi-annual
    % rate expressed as a decimal.

    n = 2 comp./yr * 4yrs = 8 Compounding
    periods.

    Pt = 2000(1.04)^8 = 2737.138101 after 4 yrs.


    r = (8.28%/4) / 100% = 0.0207 = QPR
    expressed as a decimal.

    n = 4 comp./yr * 4 yrs.=16 Compounding periods.

    Pt = 2737.138101(1.0207)^16 = $3798.98.

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