If the sum of P 12,000 (pesos) is deposited in an account earning interest rate of 9% compounded quarterly, what will it become after 1 year? B. In the previous problem, what is the effective rate? C. What is then the equivalent nominal interest rate if compounded monthly?
If the sum of P 12,000 (pesos) is deposited in an account earning interest rate of 9% compounded quarterly, what will it become after 1 year? B. In the previous problem, what is the effective rate? C. 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
7. Compound Interest
A. If the sum of P 12,000 (pesos) is deposited in an account earning interest rate of 9% compounded quarterly, what will it become after 1 year?
B. In the previous problem, what is the effective rate?
C. What is then the equivalent nominal interest rate if compounded monthly?
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
Transcribed Image Text:annual
semiannual-
quarterly
bimonthly
-
➜
m = 1
m = 2
m = 4
m = 6
mn
F = P(1+1)
m
r = nominal interest rate
m= number of compounding
periuds per year
mn
n
F = PCI + ²
= PCI+
m
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