Question
In: Finance
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 3 years agoRelated Solutions
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