Question 1025434: Peter deposits k450 00.00 with BSP which offers 4 1/2% per annum interest.Calculate the interest earned after 4 years if it is compounded every three months
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! with compound interest, the formula is:
f = p * (1 + r) ^ n
f is the future value
p is the present value
r is the interest rate per time period.
n is the number of time periods.
the interest rate if 4.5% per year.
a year is 12 months.
3 months / 12 months = 1/4 of a year.
that's equal to a quarter of a year.
the interest is compounded 4 times a year.
the time period is 1 quarter of a year.
the interest rate per time period is 4.5 / 4 = 1.125% per time period.
the number of time periods is 4 * 4 = 16 time periods.
r = percent / 100, therefore r = 1.125% / 100 = .01125.
the formula of f = p * (1+r) ^ n becomes:
f = p * 1.01125) ^ 16
i'm not exactly sure what your deposit is.
k450 00.00 doesn't make sense to me.
why the k?
i'll assume it's 450 for demonstration purposes.
you can then translate the answer to whatever value you meant, if it's not 450.
for example, if it was 450,000 rather than 450, then just multiply the answer by 1000, because 450,000 = 450 * 1000.
so, assuming the deposit is 450, then p = 450 and the formula becomes:
f = 450 * (1.01125) ^ 16.
solve for f to get f = 538.2066601.
that's the future value of the investment, which includes principal plus interest.
the interest earned is f - p = 538.2066601 - 450 = 88.2066601.
|
|
|
