RM65000 will be invested for 6 years 9 months. if the investment will be offered 5% compounded semi annualy for the first 2 years, 6% compounded monthly for the next 18 months and 7% compounded daily for the rest of the period ,find the future value of this investment.
what is the step to solve this problem ?
first step: see the first related question below, where the problem is solved.
good
To solve this problem, follow these steps:
1. Break down the investment period into the different compounding periods.
- The first 2 years will be compounded semi-annually (2 times per year).
- The next 18 months will be compounded monthly (12 times per year).
- The remaining period will be compounded daily (365 times per year).
2. Calculate the future value for each compounding period separately.
- For the first 2 years, use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the future value, P is the principal amount (RM65,000), r is the interest rate (5%), n is the number of compounding periods per year (2), and t is the number of years.
- For the next 18 months, use the same formula with different values of interest rate (6%) and number of compounding periods per year (12).
3. For the remaining period, compound daily, use the formula: A = P(1 + r/n)^(nt), where n is the number of compounding periods per year (365).
4. Add up the future values from each period to get the total future value of the investment.
Let's go through the calculation step by step.