Chapter 17: Problem 17
A certain account pays 1.5 percent compound interest every 3 months. A person
invested an initial amount and did not invest any more money in the account
after that. If after exactly 5 years, the amount of money in the account was
Short Answer
Step by step solution
- Determine the number of compounding periods
- Identify the interest rate per compounding period
- Use the compound interest formula
- Substitute the given values
- Solve for the initial principal (P)
- Select the correct answer
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Key Concepts
These are the key concepts you need to understand to accurately answer the question.
compound interest
is the amount of money accumulated after n periods, including interest. is the principal amount (the initial sum of money). is the annual interest rate (decimal). is the number of compounding periods.
financial mathematics
In this exercise, the problem-focused on the calculation of the initial investment using compound interest. The steps involved are typical of financial math problems: identifying the number of compounding periods, determining the interest rate per period, and applying the compound interest formula. Financial mathematics is essential for various applications, including investments, savings, and understanding the cost of borrowing money.
exponential growth
- The equation
embodies exponential growth, where each compounding period adds a constant percentage to the accumulated total. - For example, in the exercise provided, the amount in the account grows by 1.5% every three months.
educational test preparation
- Understand key concepts: Ensure you grasp fundamental mathematical principles, such as compound interest and financial mathematics.
- Practice problems: Regularly solve practice exercises to become familiar with various problem types and their solutions.
- Review step-by-step solutions: Go through detailed solutions to understand where you might have made mistakes and learn how to correct them.
- Time management: Practice under timed conditions to manage your time efficiently during the actual test.