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Business Math

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Compute the amount of compound interest earned in 1 year for an investment of $1,000,000 with a nominal interest rate of 8% compounded quarterly.

  • Business Math - ,

    P = Po(1+r)^n.

    Po = $1,000,000.

    r = (8%/4)/100% = 0.02 = Quarterly % .rate expressed as a decimal.

    n 4Comp./yr. * 8trs = 32 Compounding
    periods.

    Plug the above values into the given Eq and solve for P.

    I = P-Po.

  • Business Math - ,

    CORRECTION: n = 4Comp./yr. * 1yr. = 4
    Compounding periods.

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