You invest $8000 in a floating rate guaranteed investment certificate. For the first 24 months you earn 6% compounded semi-annually. For the next 6 months you earn 12% compounded monthly. What is the maturity value of the certificate?
A) $9558.02
B) $9888.00
C) $9558.00
D) $9585.00
E) $8558.00

Question

Quizplus · Accepted Answer

To solve the problem, we need to use the formula for compound interest:

A=P(1+r/n)^(nt)

where A is the maturity value, P is the principal, r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the time in years.

For the first 24 months, we have:

P = $8000 
r = 6% 
n = 2 (since it is compounded semi-annually) 
t = 2 (since it is for 24 months)

Using the formula, we get:

A = $8000(1+0.06/2)^(2x2) 
A = $8,558.00

For the next 6 months, we have:

P = $8,558.00 
r = 12% 
n = 12 (since it is compounded monthly) 
t = 0.5 (since it is for 6 months)

Using the formula, we get:

A = $8,558.00(1+0.12/12)^(12x0.5) 
A = $9,558.02

Therefore, the maturity value of the certificate is $9,558.02. However, the question asks for the nearest answer, which is C ($9,558.00).

You Invest $8000 in a Floating Rate Guaranteed Investment Certificate