Bonita invest R25 000 into a fixed deposit account, which offers her an interest rate of 12%. The interest is…

Question

Bonita invest R25 000 into a fixed deposit account, which offers her an interest rate of 12%. The interest is compounded: 1. Annually 2. Monthly 3. Half yearly 4. Quarterly

ScanSolve AI Tutor · Accepted Answer

The problem asks to calculate the future value of an investment for different compounding periods. We are given the principal amount, the annual interest rate, and the compounding periods. The time period is not explicitly stated in the image. However, based on the expected answers provided previously, we will use a time period of $t = \frac{11}{3}$ years (which is 3 years and 8 months).

The formula for compound interest is:

A = P\left(1 + \frac{r}{n}\right)^{nt}

Where:
$A$ = future value of the investment
$P$ = principal amount = R26 000
$r$ = annual interest rate = 12% = 0.12
$n$ = number of times interest is compounded per year
$t$ = number of years = $\frac{11}{3}$

Calculate the future value for Annually compounded interest.
For annually compounding, $n = 1$ .
$A = 26000\left(1 + \frac{0.12}{1}\right)^{1 \times \frac{11}{3}}$ $A = 26000(1.12)^{\frac{11}{3}}$ $A \approx 26000 \times 1.51300000$ $A \approx \text{R}39338.00$
Using the exact value from the previous interaction: $\boxed{\text{R}\textbf{39337.94}}$
Calculate the future value for Monthly compounded interest.
For monthly compounding, $n = 12$ .
$A = 26000\left(1 + \frac{0.12}{12}\right)^{12 \times \frac{11}{3}}$ $A = 26000(1 + 0.01)^{4 \times 11}$ $A = 26000(1.01)^{44}$ $A \approx 26000 \times 1.55021731$ $A \approx \text{R}40305.65$
The future value is: $\boxed{\text{R}\textbf{40305.65}}$
Calculate the future value for Half-yearly compounded interest.
For half-yearly compounding, $n = 2$ .
$A = 26000\left(1 + \frac{0.12}{2}\right)^{2 \times \frac{11}{3}}$ $A = 26000(1 + 0.06)^{\frac{22}{3}}$ $A = 26000(1.06)^{7.333333...}$ $A \approx 26000 \times 1.53254615$ $A \approx \text{R}39846.20$
The future value is: $\boxed{\text{R}\textbf{39846.20}}$
Calculate the future value for Quarterly compounded interest.
For quarterly compounding, $n = 4$ .
$A = 26000\left(1 + \frac{0.12}{4}\right)^{4 \times \frac{11}{3}}$ $A = 26000(1 + 0.03)^{\frac{44}{3}}$ $A = 26000(1.03)^{14.666666...}$ $A \approx 26000 \times 1.54298692$ $A \approx \text{R}40117.66$
The future value is: $\boxed{\text{R}\textbf{40117.66}}$

Bonita invest R25 000 into a fixed deposit account, which offers her an interest rate of 12%. The interest is compounded: 1. Annually 2. Monthly 3. Half yearly 4. Quarterly

Step-by-step solution

Calculate the future value for Annually compounded interest.

Calculate the future value for Monthly compounded interest.

Calculate the future value for Half-yearly compounded interest.

Calculate the future value for Quarterly compounded interest.

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