Thorngate Industrial commits $850,000 to a specialized fixed-rate bond investment with a non-standard 7.35% annual interest rate, compounded quarterly for a complex 8-year holding period. The company needs to calculate the accumulated value and total interest earned to assess whether this investment meets its capital growth targets for operational expansion.
Correct Answers
future_value
$1,522,180.88
interest_earned
$672,180.88
Step-by-Step Solution
Compound Interest Formula: FV = P × (1 + r/m)^(m×t) Principal (P): $850,000.00 Annual Rate: 7.35% Compounding: quarterly (m = 4) Total periods (n): 32 Rate per period (r/m): 1.8375% FV = $850,000.00 × (1 + 1.8375%)^32 FV = $850,000.00 × 1.790801 FV = $1,522,180.88 Interest Earned = FV − Principal = $1,522,180.88 − $850,000.00 = $672,180.88