ECONOMICS
COMPOUND INTEREST
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Question
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Principal:$999Interest Rate:5.45% Time:19 yearsCompounded Quarterly State the future account balance.
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$2794.10
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$2738.11
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$2774.98
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$2807.11
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Explanation:
Detailed explanation-1: -Cq = P [ (1+r)4*n – 1 ] The quarterly compounding formula is taken from the compounding formula. The only difference is that the rate of interest is raised 4*2 to reflect the quarterly computation of the interest.
Detailed explanation-2: -For example, if you had $5, 000 in a money market account with an interest rate of 5% that compounded daily, you would earn $0.68 in interest your first day.
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