ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Principal:$999Interest Rate:5.45%Time:19 yearsCompounded Quarterly
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$2, 794.10
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$2, 738.11
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$2, 774.98
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$2, 807.11
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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: -You can use the same interest rate calculation concept with other time periods: For a daily interest rate, divide the annual rate by 360 (or 365, depending on your bank). For a quarterly rate, divide the annual rate by four.
Detailed explanation-3: -The correct answer is c) 12.55%. Values from the question are: Annual interest rate = 12% per year. Compounding Frequency = 4 times in a year.
There is 1 question to complete.