If interest is paid twice a year, which method of interest calculation would provide a greater...

If interest is paid twice a year, which method of interest calculation would provide a greater amount?

A. Simple

B. Compounded

C. they would be the same

Solutions

Expert Solution

Ans B. Compounded

If interest is paid twice a year, Compounded interest calculation would provide a greater amount.

FV =	Future Value
PV =	Present Value
r =	rate of interest
n=	no of period

COMPOUND INTEREST
FV =	PV (1 + r )^n
FV =	1000*(1+5%/2)^2
FV =	1050.63


SIMPLE INTEREST
FV =	PV + PV * Rate * Time
FV =	1000 + 1000 * 5%*1
FV =	1050.00

jeff jeffy answered 2 years ago

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