# Question & Answer: ted without withdrawing any of the interest for 10 years. At the end of the 10 years,…..

Exercise 6-2 (Part Level Submission)

Alan Jackson invests \$37,700 at 10% annual interest, leaving the money invested without withdrawing any of the interest for 10 years. At the end of the 10 years, Alan withdraws the accumulated amount of money.

(a)

Compute the amount Alan would withdraw assuming the investment earns simple interest. (Round answers to 0 decimal places, e.g. 458,581.)

 Total withdrawn \$
 Attempts: 1 of 3 used

(b)

(Use the table below.)

Compute the amount Alan would withdraw assuming the investment earns interest compounded annually. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

 Total withdrawn \$
 Attempts: 1 of 3 used

(c)

(Use the table below.)

Compute the amount Alan would withdraw assuming the investment earns interest compounded semiannually. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

 Total withdrawn \$

a)

Total amount withdrawn = \$37,700 + (\$37,700*10%*10 years) = \$37,700 + \$37,700 = \$75,400

b)

Total amount withdrawn = \$37,700*1.1010 = \$97,784.09

c)

Number of semi-annual periods = 10 years * 2 = 20

Semi-annual interest rate = 10%/2 = 5% = 0.05

Total amount withdrawn = \$37,700*1.0520 = \$100,029.32