Question

Olivia deposited $800 at her local credit union in a savings account at the rate of 6.2% paid as simple interest. She will earn Interest once a year for the next 7 years. If she were to make no additional deposits or withdrawals, how much money would the credit union owe Olivia in 7 years? O $1,218.88 $852.68 $1,147.20 $149.60 Now, assume that Olivia's credit union pays a compound interest rate of 6.2% compounded annually. All other things being equal, how much will Olivia have in her account after 7 years? $849.60 O $1,147.20 O $1,218.88 O $75.57 Before deciding to deposit her money at the credit union, Olivia checked the interest rates at her local bank as well. The bank was paying a nominal Interest rate of 6.2% compounded quarterly. If Olivia had deposited $800 at her local bank, how much would she have had in her account after 7 years? O $1,230.63 O $850.77 O $149.60 O $81.04

Answer 1

Q4 Principal amount = 800 time period = 7 year type of investment = 6.27. interest Rate (simple interest Rates e of investment = 6.2% Interest Rate (simple interest Rate) simple interest - P x RxT (s. I) P = B Principle amount R = Rate of interest T= time period SiI = 800 x 6:2%x 7 100 100 2 = 347.2 Total anaount espaid ofter 7 year = 800 + 347.2 = 1147.21 Type of Investment = 6.2 Interest Rate (compounding yearly) Future Value = P(1+r) = 800 (1 + 6.2177 = 12.18.88 Q3 4 Type of Interes Investment = 602 Interest Rate / compounding Quaterly) effective interest Rate = 0.2 = 1.55 time period (quaterly) = 7x4 In 1 year their are = 28 (4 quater so 7x4 Future value = Plitot = 800 (1 + 1.55%) 28 = 1230.63