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Home Q & A Board Science-Related Homework Help Mathematics
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Lada Lada
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6 years ago
Leo wishes to invest $8000.00 that he saved from his summer job. His bank offers 3.75% for a one-year term investment or 3.5% for a six-month term. Help Leo to investigate his options.
a) How much will Leo receive after one year if he invests at the one-year rate?
b) How much will Leo receive after one-year if he invests for six-months at a time at 3.5% each time?
c) What would the one-year rate have to be to yield the same amount of interest as the investment described in part b)?
Textbook 
Contemporary Business Mathematics with Canadian Applications

Contemporary Business Mathematics with Canadian Applications


Edition: 11th
Authors:
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wrote...
#1
6 years ago
P = 80000
a) r = 0.0375; t = 1 year
   S = 8000(1 + 0.0375*1) = $8300
b) For the 1st six months: P = 8000; r = 0.035; t = 6 months = 0.5 years
     = 8000 (1 + 0.035 * 0.5) = $8140
   For the 2nd six months: P = 8140; r = 0.035; t = 6 months = 0.5 years
     = 8140 (1 + 0.035 * 0.5) = $8282.45
c) Interest described at part b) is I = 8282.45-8000 = 282.45, t = 1 year
   r =   =   = 3.5306%
wrote...
#2
3 years ago
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P = 80000

a) r = 0.0375; t = 1 year

   S = 8000(1 + 0.0375∗1) = $8300

b) For the 1st six months: P = 8000; r = 0.035; t = 6 months = 0.5 years

       = 8000 (1 + 0.035 ∗ 0.5) = $8140

   For the 2nd six months: P = 8140; r = 0.035; t = 6 months = 0.5 years

       = 8140 (1 + 0.035 ∗ 0.5) = $8282.45

c) Interest described at part b) is I = 8282.45-8000 = 282.45, t = 1 year

            r =   3.5306%
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