ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Suppose Karen has $1000 that she invests in an account that pays 3.5% interest compounded quarterly. How much money does Karen have at the end of 5 years?
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1190.34
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$1190.34
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$1190.33
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1290.34
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Explanation:
Detailed explanation-1: -For example, 5% interest with quarterly compounding has an effective annual yield of (1 + . 05/4)^4-1 = . 0509 or 5.09%.
Detailed explanation-2: -You would need to deposit $7007.08 to have $12000 in 6 years.
Detailed explanation-3: -A quarterly compounded rate refers to the fact that, within a complete year, the principal amount is compounded four times. As per the process of compound interest, if the compounding period is more within a year, it means the investors will get higher future values of their investment.
Detailed explanation-4: -About how many years will P100, 000 earn a compound interest of P50, 000 if the interest rate is 9% compounded quarterly? Explanation: 526.
There is 1 question to complete.