An eight year note for $3,800 with interest at 6% compounded semi-annually was sold after three years and three months to yield the buyer 9% compounded quarterly. What price did the buyer pay?

Compounded Semi-annually

This refers to the process of applying interest to an initial sum plus any previously earned interest, and this action occurs twice a year.

Compounded Quarterly

Refers to the process of calculating and adding interest to the principal balance four times a year.

Eight Year Note

A debt instrument with a fixed interest rate and a maturity of eight years, at which point the principal sum is repaid to investors.

Embrace the principle of compound interest and implement calculation techniques for various compounding frequencies.
Determine the contemporary worth of a future financial quantity, accounting for the effect of the time value of money.
Apply the concept of discounting to determine the present value of future cash flows.

Verified Answer

Final Answer :

$4,861.27

Learning Objectives

Embrace the principle of compound interest and implement calculation techniques for various compounding frequencies.
Determine the contemporary worth of a future financial quantity, accounting for the effect of the time value of money.
Apply the concept of discounting to determine the present value of future cash flows.