ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a decimal.
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percent form.
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a variable form.
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what is rate?
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Detailed explanation-1: -To convert a given percentage rate to decimal form, you simply move the decimal point two places to the left. In our example, when interest is compounded annually, we have an interest rate of 1.7%. To convert to decimal form, we move the decimal two places to the left to get 0.017. Thus, r = 0.017.
Detailed explanation-2: -Compound interest is calculated by multiplying the initial principal amount by one plus the annual interest rate raised to the number of compound periods minus one.
Detailed explanation-3: -"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-4: -12% is equal to 12/100 = 0.12, in decimal form.