Answered

At Westonci.ca, we connect you with the answers you need, thanks to our active and informed community. Get immediate and reliable solutions to your questions from a knowledgeable community of professionals on our platform. Experience the ease of finding precise answers to your questions from a knowledgeable community of experts.

A friend tells you she has saved for 7 years and has a present sum of $10,000, which earned at the rate of 8% per year, compounded quarterly.

Required:
a. Determine the equivalent amount she had to start with 7 years ago.
b. Write the EFFECT function to find the effective rate per year.

Sagot :

The equivalent amount she had to start with 7 years ago is $269.90.

The function to find the effective rate per year is 1.02^4 - 1.

What is the equivalent amount?

The formula that can be used to determine the equivalent amount is:

present sum / annuity factor

Annuity factor = {[(1+r)^n] - 1} / r

Where:

  • r = interest rate = 8%/4 = 2%
  • n = number of years = 7 x 4 = 28

{1.02^28} - 1 / 0.02 = 37.05121

$10,000 / 37.05121 =  $269.90

What is the effective rate per year?

Effective annual rate = (1 + APR / m ) ^m - 1

M = number of compounding

1.02^4 - 1

To learn more about the effective annual rate, please check: https://brainly.com/question/4064975

We appreciate your time on our site. Don't hesitate to return whenever you have more questions or need further clarification. Your visit means a lot to us. Don't hesitate to return for more reliable answers to any questions you may have. We're glad you chose Westonci.ca. Revisit us for updated answers from our knowledgeable team.