ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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6
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12
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24
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48
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Detailed explanation-1: -Answer and Explanation: The correct answer is c) 12.55%.
Detailed explanation-2: -For example, if the financial agency reports quarterly compounding interest, it means interest will be compounded four times per year and you would receive the interest at the end of each quarter.
Detailed explanation-3: -A 10% interest rate will double your investment in about 7 years (72 ∕ 10 = 7.2); an amount invested at a 12% interest rate will double in about 6 years (72 ∕ 12 = 6).
Detailed explanation-4: -If the rate of interest is annual and the interest is compounded quarterly (i.e., 3 months or, 4 times in a year) then the number of years (n) is 4 times (i.e., made 4n) and the rate of annual interest (r) is one-fourth (i.e., made r4).