Please help on this Financing Question!

Question

Please help! I am taking a financing class and if I fail this test I won't get my credits!

An investment of $8,000 is made at 3.5% interest for 8 years. Determine the maturity value (rounded to the nearest penny) in each of the following cases.

(a) Simple interest is used.

(b) The interest is compounded annually.

(c) The interest is compounded continuously.

Answer 1

simple interest formula: A = P(1 + rt) where P is the Principal amount of money to be invested at an Interest Rate R% per period for t Number of Time Periods.

Easy, right? P = 8000 r=3.5. t=8.

Just plug it into the formula.

For compounding, the formula changes just a bit, n = the number of times that interest is compounded per unit t. So in this problem, compounding annually, n=12

Compounded interest only (without principal): P (1 + r/n) ^(nt) - P

For continuous,it’s compounded on the initial principal as well as all interest earned, so the principal will receive interest continously.

Start there.

Is it a take home? If you feel desperate I can try to help you at a low rate. Finance isn’t in my profile but I did my Masters at Columbia in international finance, And I worked in an investment bank. This looks very basic so I think I can help you.