ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Given an investment of $1, 500:Which investment would have a larger balance after 5 years?Option 1-4% compounded monthlyOption 2-3.9% compounded daily.
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Option 1
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Option 2
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Either A or B
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None of the above
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Explanation:
Detailed explanation-1: -How long will it take $4, 000 to grow to $9, 000 if it is invested at 7% compounded monthly? 11.62 yrs.
Detailed explanation-2: -Hence, the time is approximately 4.53 years .
Detailed explanation-3: -The rule is a shortcut, or back-of-the-envelope, calculation to determine the amount of time for an investment to double in value. The simple calculation is dividing 72 by the annual interest rate.
Detailed explanation-4: -Ending Investment = Start Amount * (1 + Interest Rate) ^ n For daily compounding, the interest rate will be divided by 365, and n will be multiplied by 365, assuming 365 days in a year.
There is 1 question to complete.