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lubasha [3.4K]
3 years ago
11

Precision engineering invested $125,000 at 6 percent interest, compounded annually for 3 years. how much interest on interest di

d the company earn over this period of time?
Business
1 answer:
katrin2010 [14]3 years ago
5 0
The future amount of the current investment/credit with interest that is compounded annually can be calculated through the equation,
                         F = P x (1 + r)^n
where F is the future amount, P is the principal, r is the decimal equivalent of the given rate, and n is the number of years. 
Substituting the known values,
                         F = ($125,000) x (1 + 0.06)^3 = $148,877
The interest is therefore,
                                        I = $148,877 - $125,000 = $23,877
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e) Increase the required rate of return used to evaluate the project to reflect the higher risk of the project

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