If $100 is invested at 6% compunded

Question

A - annually
B - quarterly
C - monthly
what is the amount after 4 years? How much interest is earned?

Answer 1

A. Pt = Po*(1+r)^n.
r = 6%/100% = 0.06 = Annual % rate expressed as a decimal.
n = 1 comp./yr * 4 yrs = 4 compounding
periods.

Pt = 100*(1.06)^4=$126.25 After 4 yrs.
Int. = Pt - Po = 126.25 - 100 = $26.25.

B. Pt = Po*(1+r)^n.
r = (6%/4) / 100% = 0.015 = Quarterly
% rate expressed as a decimal.
n = 4 comp./yr. * 4yrs = 16 compounding
periods. Calculate Pt and Int.

C. Pt = Po*(1+r)^n.
r = (6%/12) / 100% = 0.005 = Monthly %
rate expressed as adecimal.
n = 12 comp./yr * 4yrs = 48compounding
periods. Calculate Pt and Int.

Answer 2

0.5