ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$1, 225, 54
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$2, 100.34
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$22, 255.40
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$225.54
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Detailed explanation-1: -Compound interest, can be calculated using the formula FV = P*(1+R/N)^(N*T), where FV is the future value of the loan or investment, P is the initial principal amount, R is the annual interest rate, N represents the number of times interest is compounded per year, and T represents time in years.
Detailed explanation-2: -Compound Interest Formula P = principal. r = rate of interest. n = number of times interest is compounded per year. t = time (in years)
Detailed explanation-3: -For this reason, lenders often like to present interest rates compounded monthly instead of annually. For example, a 6% mortgage interest rate amounts to a monthly 0.5% interest rate. However, after compounding monthly, interest totals 6.17% compounded annually.
Detailed explanation-4: -Compounded semiannually means that the rate of interest is charged every 6 months which makes it half a year. Thus, the effective annual rate of 10 percent compounded semiannually will be 10.25%.]