create a new table factor and calculate the compound amount for $10.000 with a nominal rate of 6% for 4 years
To create a new table factor and calculate the compound amount for $10,000 with a nominal rate of 6% for 4 years, you can follow these steps:
1. Determine the compounding period: You need to know how often the interest is compounded within the year. If it is compounded annually, semi-annually, quarterly, or monthly, it will affect the calculations. Let's assume it is compounded annually.
2. Calculate the effective interest rate per period: The nominal rate of 6% is for a year, so we need to convert it into the effective rate per compounding period. Since the interest is compounded annually, the effective interest rate per period will be 6% / 1 = 6%.
3. Calculate the table factor: The table factor, also known as the future value factor or compound amount factor, is the value used to multiply the initial amount to determine the future value after a certain number of periods. The formula for calculating the table factor is: (1 + r)^n, where r is the effective interest rate per period, and n is the number of periods. In this case, r = 6% = 0.06, and n = 4.
Table Factor = (1 + 0.06)^4 = 1.26248
4. Calculate the compound amount: To calculate the compound amount, multiply the initial amount by the table factor.
Compound Amount = Initial Amount * Table Factor
= $10,000 * 1.26248
≈ $12,624.80
Therefore, the compound amount for $10,000 with a nominal rate of 6% for 4 years is approximately $12,624.80.