ECONOMICS (CBSE/UGC NET)

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ECONOMICS

COMPOUND INTEREST

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
You invest $400 for 5 years with an interest rate of 4.29% compounded annually each year. Choose the correct formula.
A
y=400(1-0.0429)5
B
y=400(1+.0429)5
C
y=400(1+ 4.29)5
D
y=400e0.049*5
Explanation: 

Detailed explanation-1: -It is calculated by multiplying the first principal amount by one and adding the annual interest rate raised to the number of compound periods subtract one. The total initial amount of your loan is then subtracted from the resulting value. P is principal, I is the interest rate, n is the number of compounding periods.

Detailed explanation-2: -Answer and Explanation: The correct answer is d) $1, 116.14.

Detailed explanation-3: -5% = 0.05 . Then multiply the original amount by the interest rate. $1, 000 * 0.05 = $50 . That’s it.

Detailed explanation-4: -The future value of a $1000 investment today at 8 percent annual interest compounded semiannually for 5 years is $1, 480.24. It is computed as follows: FutureValue=1, 000∗(1+i)n.

There is 1 question to complete.
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