Posted by MIKE. on .
You deposit $10,000 at 5% per year. What is the balance at the end of
one year if the interest paid is
(a) simple interest
(b) compounded monthly
A=amount at the end of n periods
r=interest rate per annum, 0.06 for 6% p.a.
R=interest rate per period, in the form
(1+r/k) where k=number of periods per year
(1+0.06)=1.06 for 6% p.a., or
(1+0.06/12)=1.005 for 6% p.a. compounded monthly
Compound interest, compounded monthly
Okay where did the 6% came in from?
The 6% is an example for the definition of the symbol R. Sorry if it misled you!