7. If the sum of P 12,000 is deposited in an account earning interest rate of 9% compounded quarterly, what will it become after 1 year? 8. In the previous problem, what is the effective rate? 9. What is then the equivalent nominal interest rate if compounded monthly?
7. If the sum of P 12,000 is deposited in an account earning interest rate of 9% compounded quarterly, what will it become after 1 year? 8. In the previous problem, what is the effective rate? 9. What is then the equivalent nominal interest rate if compounded monthly?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Answer the following
Transcribed Image Text:Compound Interest
7. If the sum of P 12,000 is deposited in an account earning interest
rate of 9% compounded quarterly, what will it become after 1 year?
8. In the previous problem, what is the effective rate?
9. What is then the equivalent nominal interest rate if compounded
monthly?
10. How many years are required for P 1,000 to increase to P 2,000 if
invested at 9% per year compounded continuously?
11. What payment X ten years from now is equivalent to a payment of P
1,000 six years from now, if interest is 15% compounded monthly?
12. An investment of P3M earns interest of 9% compounded continuously.
What is the effective rate of interest?
13. What rate in percent compounded monthly is equivalent to 18%
compounded semi-annually? 14. When compounded bi-monthly, P150,000
becomes P223,183 after 5 years. What is the nominal rate of interest?
Transcribed Image Text:COMPOUND INTEREST
- both the principal and and interest earn interest.
"interest on top of interest"
n
F = P(1 + i)"
where
F = future worth at the end of
n period
P= present worth or
n= period
1 =
principal
compound interest rate
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