You deposit $175,000 in a savings account. The APR (Annual Percentage Rate) is 6%. Calculate the following: B) Assuming that the interest is compounded every month, what is the amount accumulated after ten years? For this one I am not sure what equation to use, I have gotten two separate answers: EAR- (1+.06/12)^12-1= 6.168% ---- 175000*(1.06168)^10= $318,400.99 EAR- (1+.06/12)^12*10-1= 81.94% or 1.8194 --- 175,000(1.8194)= 318,395 Which one is right? C) Assuming that the interest is compounded every day, what is the amount accumulated after ten years? EAR- (1+.06/365)^365-1= 6.183% ----- 175000*(1.06183)^10= $318,851.13 Am I doing this correctly or should I use: EAR- (1+.06/365)^365*10-1= ?
You deposit $175,000 in a savings account. The APR (Annual Percentage Rate) is 6%. Calculate the following: B) Assuming that the interest is compounded every month, what is the amount accumulated after ten years? For this one I am not sure what equation to use, I have gotten two separate answers: EAR- (1+.06/12)^12-1= 6.168% ---- 175000*(1.06168)^10= $318,400.99 EAR- (1+.06/12)^12*10-1= 81.94% or 1.8194 --- 175,000(1.8194)= 318,395 Which one is right? C) Assuming that the interest is compounded every day, what is the amount accumulated after ten years? EAR- (1+.06/365)^365-1= 6.183% ----- 175000*(1.06183)^10= $318,851.13 Am I doing this correctly or should I use: EAR- (1+.06/365)^365*10-1= ?
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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Question
- You deposit $175,000 in a savings account. The APR (Annual Percentage Rate) is 6%. Calculate the following:
B) Assuming that the interest is compounded every month, what is the amount accumulated after ten years?
For this one I am not sure what equation to use, I have gotten two separate answers:
EAR- (1+.06/12)^12-1= 6.168% ---- 175000*(1.06168)^10= $318,400.99
EAR- (1+.06/12)^12*10-1= 81.94% or 1.8194 --- 175,000(1.8194)= 318,395
Which one is right?
C) Assuming that the interest is compounded every day, what is the amount accumulated after ten years?
EAR- (1+.06/365)^365-1= 6.183% ----- 175000*(1.06183)^10= $318,851.13
Am I doing this correctly or should I use: EAR- (1+.06/365)^365*10-1= ?
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