SOLUTION: Hi
which of the following rates would give the best return on $1500 invested for 3 years.
a) 12% compounded annually
b) 1% compounded monthly
my answer was a) the text
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which of the following rates would give the best return on $1500 invested for 3 years.
a) 12% compounded annually
b) 1% compounded monthly
my answer was a) the text
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Question 1135359: Hi
which of the following rates would give the best return on $1500 invested for 3 years.
a) 12% compounded annually
b) 1% compounded monthly
my answer was a) the textbook said b) who is correct?
thanks Found 2 solutions by ikleyn, Alan3354:Answer by ikleyn(52803) (Show Source):
1. $1500 invested for 3 years at 12% annual interest rate compounded annually
Future value FV = = $2107.39.
2. $1500 invested for 3 years at 1% annual interest rate compounded monthly
Future value FV = = $1545.66.
3. You compare.
If the textbook said b), it means that the person, who is responsible for this part in the textbook,
does not understand terminology correctly.
He, probably, interprets part b) as
Future value FV = = $2146.15.
It is, really, greater than a), but it is called
$1500 invested for 3 years at 12% annual interest rate compounded monthly.
You can put this solution on YOUR website! b) 1% compounded monthly
my answer was a) the textbook said b) who is correct?
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Interest is usually stated in % per year.
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1% per month compounded monthly gives
$1500*(1.01)^36 = $2146.15
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It's a poorly written problem.
