SOLUTION: You deposit $10,000 in an account that pays 5.5% interest compounded quarterly.
A. Find the future value after one year.
B. Use the future value formula for simple interest to
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Question 1200464: You deposit $10,000 in an account that pays 5.5% interest compounded quarterly.
A. Find the future value after one year.
B. Use the future value formula for simple interest to determine the effective annual yield.
Answer by greenestamps(13203) (Show Source): You can put this solution on YOUR website!
A. 5.5% (annual interest) compounded quarterly means (5.5)/4 = 1.375% each quarter. The value of an initial deposit of $10,000 at that rate for 1 year (4 quarters) is
= 10561.45
ANSWER: $10561.45
B. The growth factor over the year is
so the effective simple (annual) interest rate is 5.6145%
ANSWER: 5.6145%
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