ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$9000 is invested at 6.4% p.a. compounded monthly for 10 years. What will be the value of the “real value” of the interest earned if the average inflation rate of this time period is 2.1%? [1 pt]
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$9896.40
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$8039.33
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$6530.74
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None of the above
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Explanation:
Detailed explanation-1: -If you invest $10, 000 today at 10% interest, how much will you have in 10 years? Summary: The future value of the investment of $10000 after 10 years at 10% will be $ 25940.
Detailed explanation-2: -For this reason, lenders often like to present interest rates compounded monthly instead of annually. For example, a 6% mortgage interest rate amounts to a monthly 0.5% interest rate. However, after compounding monthly, interest totals 6.17% compounded annually.
Detailed explanation-3: -Summary: An investment of $10000 today invested at 6% for five years at simple interest will be $13, 000.
Detailed explanation-4: -488.86. Hence, Compound interest would be Rs. 488.86.
There is 1 question to complete.