# ECONOMICS (CBSE/UGC NET)

## ECONOMICS

### COMPOUND INTEREST

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Maggie deposited \$50 in a savings account earning 12% interest, compounded annually. How much will she have in 5 years?
 A \$30 B \$38.12 C \$80 D \$88.12
Explanation:

Detailed explanation-1: -Examples: “12% interest” means that the interest rate is 12% per year, compounded annually. “12% interest compounded monthly” means that the interest rate is 12% per year (not 12% per month), compounded monthly. Thus, the interest rate is 1% (12% / 12) per month.

Detailed explanation-2: -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). Using the Rule of 72, you can easily determine how long it will take to double your money.

Detailed explanation-3: -1) What is the amount of money that you’d have if you invested \$50 at an interest rate of 6% compounded monthly after a period of 3 years? 06112.3 A=50 (1+-06) 12 \$59.84 Page 8 Ex.