SOLUTION: Jeanne Marie said there is no difference between an 8% annual interest rte compounded quarterly and an 8% annual interest rate Explain to Jeanne Marie the error of her ways using e

Question 396377: Jeanne Marie said there is no difference between an 8% annual interest rte compounded quarterly and an 8% annual interest rate Explain to Jeanne Marie the error of her ways using examples and a clear explanation
Found 2 solutions by rfer, stanbon:
Answer by rfer(16322) (Show Source): You can put this solution on YOUR website!
lets use $100 invested
A=100(1+0.08/4)^1*4
A=100(1.02)^4
A=108.24 compounded quarterly
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A=100(1+0.08)
A=100*1.08
A=108 not compounded
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
Jeanne Marie said there is no difference between an 8% annual interest rate compounded quarterly and an 8% annual interest rate.
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Explain to Jeanne Marie the error of her ways using examples and a clear explanation
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Growth in value in 10 years of $1 if invested at 8% compounded quarterly
A(1) = 1(1+(0.08/4))^(4*10)
---
= (1+0.02)^40
= $2.2080..

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Growth in value in 10 years of $1 if invested at 8% annual rate
= 1 + 0.08*10
= $1.80
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Cheers,
Stan H.

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