Compounding is the sum of principal and interest multiplied by the interest rate we use to...

Question

Question

Compounding is the sum of principal and interest multiplied by the interest rate we use to calculate interest for the next period. True or False?

Answer 1

Answer #1

Compound Interest is the interest on interest and is calculated thus

If Amount is A at the beginning of the period and rate is r% pa then,

Amount at the end of 2 years = A*(1+r)*(1+r)

So compounding is actually the sum of principal and interest multiplied by (1+ interest rate).

Answer is False

Answer 2

Similar Homework Help Questions

Time 13. Calculate the total interest earned for the investment below. Principal Rate of Compound Compounding...

Time 13. Calculate the total interest earned for the investment below. Principal Rate of Compound Compounding Interest per Year Period $8200 2.8% quarterly 15 years
You are given the principal, the annual interest rate, and the compounding period. Determine the value...

You are given the principal, the annual interest rate, and the compounding period. Determine the value of the account at the end of the specified time period. Round to two decimal places. $5,000,6%, quarterly, 2 years O A $5,618.00 OB. $7,969.24 OC. $5,151.13 OD. $5,632.46
10% per vear compounded monthly this interest rate is a an interest is advertised in the...

10% per vear compounded monthly this interest rate is a an interest is advertised in the newspaper as 'APY nominal rate True False Question 2 (4 points) Saved A nominal interest is an interest rate that does not account for compounding. In other words, a nominal Interest rate, is an interest rate that does not include any consideration of compounding True False Question 3 (4 points) Saved rest i ti med to be equal to the period over which the...

An investment earns interest, compounded semi-annually, for 30 compounding periods. For how long is the principal...

An investment earns interest, compounded semi-annually, for 30 compounding periods. For how long is the principal invested? Ap('tight O 7.5 years O 15 years O 30 years O 15 months Question 10 (1 point) An investment offers 8% annual interest, compounded quarterly. What is the interest rate per compounding period? O8% OOO А в PCts hя + A=P(l+ilux A= lood tih
6. At an interest rate of 6% annually, how long will it take for a sum to double? What if quarterly compounding or month...

6. At an interest rate of 6% annually, how long will it take for a sum to double? What if quarterly compounding or monthly compounding is applied?
1. Using Python write a function for compounding interest. There should be three arguments to the...

1. Using Python write a function for compounding interest. There should be three arguments to the function: a starting amount, a total interest rate, and the number of compounding periods. The function returns the ending value. Notes: normally, interest rates are given per period, or annually. The total interest rate would be the per-period interest rate multiplied by the number of compounding periods. Or in your function, the per-period interest added is the total rate divided by the number of...

In lecture, Professor Gruber explained discrete compounding interest. Interest can also be compounded continuously. Here we...

In lecture, Professor Gruber explained discrete compounding interest. Interest can also be compounded continuously. Here we explain the difference. Professor Gruber calculated future value as FV = P(1+r)", where P is the principal, r is the interest rate, and t is the term of the contract (often in years). This formula can be generalized to FV = P(1+r/m)mt, where m is the number of compounding periods per year (in lecture, this was 1). That is, after every compounding period, more...
1) For Nominal Interest Rate expression select one of the following: A. Interest period≥ Compounding period...

1) For Nominal Interest Rate expression select one of the following: A. Interest period≥ Compounding period B. Interest period = Compounding period C. Interest period < Compounding period D. Compounding period≥ Interest period. 2)If the nominal interest rate is 10% per year compounded weekly, then what is “z% per half year compounded weekly”? A. 10% B. 2% C. 5% D. 6%
To compute the interest for notes payable, multiply principal times the annual rate of interest. true...

To compute the interest for notes payable, multiply principal times the annual rate of interest. true or false

In the process of compounding, we move fror[ Select ] to present future Select ] In...

In the process of compounding, we move fror[ Select ] to present future Select ] In the process of discounting, we move fromSelect ] to Select ] In th I Select]case, interest earns interest. compound rate of interest simple rate of interest In the Select] cast, interest doesn't earn interest. There are 12 months in one year, 4 weeks in one month, so 1 year- 48 weeks. O True False