ECONOMICS
MONEY MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$120
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$144
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$132
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None of the above
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Detailed explanation-1: -Simply divide your APY by 12 (for each month of the year) to find the percent interest your account earns per month. For example: A 12% APY would give you a 1% monthly interest rate (12 divided by 12 is 1). A 1% APY would give you a 0.083% monthly interest rate (1 divided by 12 is 0.083).
Detailed explanation-2: -Divide the 10 percent simple interest rate by 100 to convert to the decimal form of 0.10. Divide 0.10 by 12 to find the periodic interest rate for one month, which equals 0.00833.
Detailed explanation-3: -If you were to gain 10% annual interest on $100, for example, the total amount earned per year would be $10. At the end of the year, you’d have $110: the initial $100, plus $10 of interest.
Detailed explanation-4: -Effective annual interest rate = (1 + (nominal rate ÷ number of compounding periods)) ^ (number of compounding periods)-1. For investment A, this would be: 10.47% = (1 + (10% ÷ 12)) ^ 12-1. And for investment B, it would be: 10.36% = (1 + (10.1% ÷ 2)) ^ 2-1.