My last question may have seemed confusing to the last agent that answered it. I'm going to use $100 as the principal amount and 10% as the rate. If compounded daily is suppose to change the frequency at which it is compounded then why does 100(1+.1/365)365(1)=110.51 if compounded 365 times in a year? 100(1+.1/1)1=110 if compounded only once per year? If compounded interest is taking the percentage of the principal amount(+interest) then adding it to the amount per compound why is it basically the same answer if it was compounded 365 times as it was one time? Shouldn't compounding be the percentage of the principal amount(+interest) each time it is compound? If you have $100 and it is compounded once shouldn't it come out to $110 the first time, $121 the second time and $133.10 the third time? If frequency of when it is compounded is suppose to be the only thing that changes then shouldn't the amount that was compounded 365 times be substantially greater than the one that was only compounded one time?
My last question may have seemed confusing to the last agent that answered it. I'm going to use $100 as the principal amount and 10% as the rate. If compounded daily is suppose to change the frequency at which it is compounded then why does
100(1+.1/365)365(1)=110.51 if compounded 365 times in a year?
100(1+.1/1)1=110 if compounded only once per year?
If
Shouldn't compounding be the percentage of the principal amount(+interest) each time it is compound? If you have $100 and it is compounded once shouldn't it come out to $110 the first time, $121 the second time and $133.10 the third time? If frequency of when it is compounded is suppose to be the only thing that changes then shouldn't the amount that was compounded 365 times be substantially greater than the one that was only compounded one time?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
