ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$307, 042, 791
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$5, 000
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$3, 250
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$4, 395.89
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Detailed explanation-1: -k is the number of compounding periods in one year. If the compounding is done annually (once a year), k=1. If the compounding is done quarterly, k=4. If the compounding is done monthly, k=12.
Detailed explanation-2: -m=Nk m = N k . Ex. An investment of $1000 earning interest of 4% compounded quarterly (4 times per year) is left in the account for 3 years. If we leave our money in for 1 year, the number of compounding periods is 1∗4:m=4 1 ∗ 4 : m = 4 .
Detailed explanation-3: -About how many years will P100, 000 earn a compound interest of P50, 000 if the interest rate is 9% compounded quarterly? Explanation: 526.
Detailed explanation-4: -A compound interest account pays interest on both your initial investment plus any interest previously accrued. This interest-upon-interest appreciation is the “compounding” factor that grows with time. Simple interest accounts, on the other hand, only pay interest on the original principal.