Question

Por Jou pie M ICELIUI SCVCIl years. Which option is better? Interest effective and Interest compounded 5. Suppose your savings account pays 9% interest compounded quarterly. If you deposit $25,000 for one year, how much would you have? 6. If your credit card calculates the interest based on 12.5% APR, what is your monthly interest rate and annual effective interest rate, respectively?

help

Answer 1

Solution-5) i = 9% / 4 = 0.0225

n = 4 times

FV = 9,000 (P/F, 2.25%,4) = 9,000 * 0.9148 = 27,327.08

Solution-6) Monthly interest rate: APR / 12 months = 12.5% / 12 = 1.0417%

Annual effective interest rate: (1 + 1.0417)^12 = 13.24%

　

Solution-7) 30,000 ( F/P, 9% ,3)

= 30,000 * 1.2950

= 38,850.87

As per policy we have to answer first question; I have answered more than it