Asked by Ally
Find the value of $15,000 at the end of one year if it is invested in an account that has an interest rate of 4.50% and is compounded:
a) monthly
b) daily (assuming a 365-day year)
c) quarterly
What is the formula that should be used for these 3? I just need help getting started.
a) monthly
b) daily (assuming a 365-day year)
c) quarterly
What is the formula that should be used for these 3? I just need help getting started.
Answers
Answered by
Steve
If compounded n time per year, the annual rate has to be divided by n, so after t years there have been n*t periods of compounding at the smaller rate.
15000(1+.045/n)^(n*t)
You have t=1
15000(1+.045/n)^(n*t)
You have t=1
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