You can earn $42 in interest on a $1,000 deposit for eight months. If the EAR is the same regardless of the length of the investment, how much interest will you earn on a $1,000 deposit for: a. 9 months. b. 1 year. c. 1.9 years.
You can earn $42 in interest on a $1,000 deposit for eight months. If the EAR is the same regardless of the length of the investment, how much interest will you earn on a $1,000 deposit for: a. 9 months. b. 1 year. c. 1.9 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
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You can earn $42 in interest on a $1,000 deposit for eight months. If the EAR is the same regardless of the length of the investment, how much interest will you earn on a $1,000 deposit for:
a. 9 months.
b. 1 year.
c. 1.9 years.
Expert Solution
Step 1: Introduction
Compound interest is computed by multiplying the original principal amount by one plus the yearly interest rate multiplied by the number of compound periods minus by one. The whole original loan amount is then deducted from the final value. Compound interest is interest computed on a loan or deposit depending on both the initial principal and the accumulated interest from prior periods.
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