ECONOMICS (CBSE/UGC NET)

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ECONOMICS

SAVING AND INVESTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Alicia Martin’s savings account has a principal of $1, 200. It earns 7% interest compounded quarterly . How much compound interest will she earn after 9 months?
A
$64.79
B
$64.11
C
$42.37
D
$42.36
Explanation: 

Detailed explanation-1: -For example, 5% interest with quarterly compounding has an effective annual yield of (1 + . 05/4)^4-1 = . 0509 or 5.09%.

Detailed explanation-2: -In such cases we use the following formula for compound interest when the interest is calculated quarterly. Here, the rate percent is divided by 4 and the number of years is multiplied by 4. Note: A = P(1 + r4100)4n is the relation among the four quantities P, r, n and A.

Detailed explanation-3: -A = P (1 + r / m) mt r (rate of return. You can calculate this by, ROR = (Current Investment Value – Original Investment Value)/Original Investment Value * 100read more) = 2% compounded quarterly. m (number of the times compounded quarterly) = 4 (times a year)

Detailed explanation-4: -Answer: The answer to this question is Rs 183.624.

There is 1 question to complete.
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