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Part 1

 

An investment of

$3699.23

earns interest at

6.4

per annum compounded

quarterly

for

2

years. At that time the interest rate is changed to

2.7 %

compounded

semi-annually.

How much will the accumulated value be

2

years after the change?

 

For compound interest, the formula for the future value, FV, is given below, where PV is the original principal, i is the periodic rate of interest, and n is the number of compounding periods for the term of the loan or investment.   formula   FV=PV(1+I)n

The periodic rate of interest, i, can be found using the formula shown below, where j is the nominal annual rate of interest and m is the number of compounding (conversion) periods per year.         formula  i=j/m

 

Use the future value formula in two steps. Start by finding the future value at the end of the first time period. Then, using that result as the present value, find the future value at the end of the second time period.