What difference does compounding make? You have a $10 000 debt. Calculate the interest and amount for each. Interest rate Compounded Time Interest Amount 7% Simple (n/a) 3 years 7% Annually 3 years 7% Semi-annually 3 years 7% Monthly 3 years 7% Daily 3 years
What difference does compounding make? You have a $10 000 debt. Calculate the interest and amount for each. Interest rate Compounded Time Interest Amount 7% Simple (n/a) 3 years 7% Annually 3 years 7% Semi-annually 3 years 7% Monthly 3 years 7% Daily 3 years
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
Related questions
Question
. What difference does compounding make?
You have a $10 000 debt. Calculate the interest and amount for each.
|
Interest rate |
Compounded |
Time |
Interest |
Amount |
|
7% |
Simple (n/a) |
3 years |
||
|
7% |
Annually |
3 years |
||
|
7% |
Semi-annually |
3 years |
||
|
7% |
Monthly |
3 years |
||
|
7% |
Daily |
3 years |
Expert Solution
Step 1: Introduction
Solution:
When an amount is invested somewhere, it earns interest on it.
The amount initially invested is called the principal value and amount at maturity is called maturity value.
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