Question

John invested $3000 that earns interest at 4% p.a. compounded monthly. Two years later, the interest rate is changed to 4.50% compounded quarterly. Determine the accumulated value of the investment two years after the change.

Answer 1

Answer:

The Accumulated value of investment two years after the change is  $3280.8

Step-by-step explanation:

Given as :

Investment principal = $3000

The interest rate compounded monthly = 4%

The time period = 2 years

From compounded method for monthly

Amount = Principal × $(1+\frac{Rate}{12\times 100})^{12\times Time}$

Or, Amount = $3000 × $(1+\frac{4}{12\times 100})^{12\times 2}$

Or, Amount = $3000 × $(1.0033)^{24}$

∴   Amount = $3246.8

Now The interest rate change to 4.50% for compounded quarterly

Amount = Principal × $(1+\frac{Rate}{4\times 100})^{4\times Time}$

Or, Amount = $3000 × $(1+\frac{4.50}{4\times 100})^{4\times 2}$

Or, Amount = $3000 × $(1.01125)^{8}$

∴   Amount = $3280.8

Hence The Accumulated value of investment two years after the change is  $3280.8  Answer