Suppose you deposit $1,000 at the end of each quarter for five years at an interest rate
Question:
Suppose you deposit $1,000 at the end of each quarter for five years at an interest rate of 9% compounded monthly. Which of the following formulas will determine the equal annual end‐of‐year deposit amount that would accumulate the same balance over five years under the same interest compounding as the $1,000 deposited quarterly?
(a) A = [$1,000(F/A, 2.25%, 20)] × (A/F, 9%, 5).
(b) A = $4,000 (F/A, 9%, 5).
(c) A = $1,000 (F/A, 9%/12, 20) × (A/F, 9%, 5).
(d) None of the above.
Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Question Posted: