Question

Nancy plans to invest some money so that she has $3,600 at the end of three years. Determine how much should she invest today given the following choices: (Do not round intermediate calculations and round your final answer to the nearest penny.) a. 4.2 percent compounded daily. Amount required to be invested $ b.4.9 percent compounded monthly. Amount required to be invested $ c.5.2 percent compounded quarterly. Amount required to be invested $ d.5.4 percent compounded annually. Amount required to be invested $

Answer 1

Correct Answer:

Amount Required to be invested
A	$ 3,173.80
B	$ 3,108.80
C	$ 3,083.10
D	$ 3,074.50

Working:

A=

P*(1+R)^T

Therefore:

P =

A/(1+R)^T

A: Compounded Daily
R	4.2% / 365 Days =	0.0115%
T	3 * 365 Days =	1095 days
A	3600

P =	A/(1+R)^T
A	$        3,600
1+R	1.0001151
T	1095
(1+R)^T	1.1342739
P = A/(1+R)^T	3173.8

B: Compounded Monthly
R	4.9% / 12 Months =	0.4083%
T	3 * 12 Months =	36
A	3600

P =	A/(1+R)^T
A	$        3,600
1+R	1.0040833
T	36
(1+R)^T	1.1580073
P = A/(1+R)^T	$    3,108.8

C: Compounded Quarterly
R	5.2% / 4 Quarters	1.30%
T	3 * 4 quarters	12
A	3600

P =	A/(1+R)^T
A	$        3,600
1+R	1.013
T	12
(1+R)^T	1.1676518
P = A/(1+R)^T	$    3,083.1

D: Compounded Annually
R	5.4%	5.4%
T	3	3
A	3600

P =	A/(1+R)^T
A	$        3,600
1+R	1.054
T	3
(1+R)^T	1.1709055
P = A/(1+R)^T	$    3,074.5

End of Answer.

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