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For a sum of money invested at 10
For a sum of money invested at 10.5% compounded semi-annually for 8 years state the following values. (a) the number of compounding periods (b) the periodic rate of interest (c) the compounding factor (1 + i)n (d) the numerical value of the compounding factor (a) The number of compounding periods is (Type an integer or a decimal.) a (b) The periodic rate of interest is %. (Round to six decimal places as needed.) (c) The compounding factor is (1+ (Type integers or decimals.) (d) The numerical value of the compounding factor is (Round to six decimal places as needed.)
Expert Solution
A) Number of Compounding periods = Number of years * Number of compounding in a year
= 8 * 2 [ 2 is for semi - annually]
Number of Compounding periods= 16
B) Periodic rate of interest = Interest rate / Number of compounding in a year
= 10.5%/2
Periodic rate of interest= 5.25%
C) Compounding factor = (1+ Interest rate per period)^Number of periods
Compounding factor = (1+5.25%)^16
D) Numerical value
Compounding factor = (1+5.25%)^16
= (1.0525)^16
Numerical value= 2.2675332c
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