BACHELOR OF BUSINESS ADMINISTRATION

BUSINESS ADMINISTRATION

FINANCIAL MANAGEMENT

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Suppose you invest $1, 000 today, compounded quarterly, with the annual interest rate of 5.00%. What is your investment worth in one year?
A
$1, 025.00
B
$1, 050.95
C
$$1, 051.95
D
$1, 150.95
Explanation: 

Detailed explanation-1: -Answer and Explanation: The calculated value of the investment in 1 year is $1, 050.94 .

Detailed explanation-2: -For example, 5% interest with quarterly compounding has an effective annual yield of (1 + . 05/4)^4-1 = . 0509 or 5.09%.

Detailed explanation-3: -Answer: $1, 000 invested today at 6% interest would be worth $1, 060 one year from now. Let us solve this step by step.

Detailed explanation-4: -Therefore, the amount received annually through compound interest on Principal = 1000, Rate = 5% and Time = 3 years is Rs. 1, 157.625.

Detailed explanation-5: -Example: Consider a one-year loan with a 5 percent APR compounding quarterly. Effective annual interest rate = (1 + (APR / number of compounding periods)) ^ (number of compounding periods)-1. (1+(0.05/4))^(4)-1.

There is 1 question to complete.