Finance math

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If $100 is invested at 6% compunded
A - annually
B - quarterly
C - monthly
what is the amount after 4 years? How much interest is earned?

  • Finance math -

    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.

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