GIVEN:
We are given the details of an investment as follows;
Initial investment = $19,400
Interest rate = 3.16%
Period of investment = 9 years and 6 months
Required;
To use the information given to calculate
(a) The maturity value at the end of the term
(b) The amount of compound interest earned.
Step-by-step solution;
The formula applied in calculating the maturity value is as follows;
[tex]A=P(1+r)^t[/tex]Where the variables are;
[tex]\begin{gathered} A=Maturity\text{ }value \\ \\ P=Initial\text{ }investment\text{ }(19400) \\ \\ r=rate\text{ }of\text{ }interest\text{ }(0.0316) \\ \\ t=time\text{ }in\text{ }years\text{ }(9.5) \end{gathered}[/tex]However, for an investment whose interest is compounded at different intervals within 1 year, the formula becomes modified as shown below;
[tex]A=P(1+\frac{r}{n})^{tn}[/tex]Where the variable n is the number of times interest is compounded annually. For an investment whose interest is compounded quarterly, that is, four times a year, the formula becomes;
[tex]A=P(1+\frac{r}{4})^{4t}[/tex]We can now calculate as follows;
[tex]\begin{gathered} A=19400(1+\frac{0.0316}{4})^{4\times9.5} \\ \\ A=19400(1+0.0079)^{38} \\ \\ A=26161.6208681 \\ \\ A\approx26161.62 \end{gathered}[/tex]We can now determine the amount of compound interest earned by deducting the initial amount invested from the maturity value. Thus we have;
[tex]\begin{gathered} Interest=A-P \\ \\ Interest=26161.62-19400 \\ \\ Interest=6761.62 \end{gathered}[/tex]Therefore,
ANSWER:
[tex]\begin{gathered} Maturity\text{ }value=26,161.62 \\ \\ Interest=6,761.62 \end{gathered}[/tex]