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Question 540883: Sim invests $9000 at 2% per annum compound interest compounded yearly. What is his amount at the end of third day?
Found 2 solutions by Theo, ikleyn:
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! interesting question.
i'm not sure what the policy of the bank is, but, mathematically, this is what is probably happening.
you are earning 2% interest per year that is being compounded yearly.
this means that the interest earned does not earn additional interest until the end of each year.
what happens in between depends on the policy of the bank.
assuming that the bank accrues interest at the end of each day, and assuming that the number of days in the year for banking purposes is considered to be 365, then you would be earning at the rate of .02 * 9000 / 365 = $0.493150685 interest per day.
at the end of the third day, the interest accrued to your account would be 3 * that which would be equal to $1.479452055.
at the end of 365 days, the interest accrued to your account would be 365 * that which would be equal to $180.00.
it is only at the end of the compounding period that the interest accrued is then posted to your account as principal.
if you look at the balance of the principal in your account, you would see only $9,000 until the end of the first accounting period, at which time you would see $9,180.00
i'm assuming that the interest is accrued to your account every day.
it might not.
it might only accrue to your account at the end of each month.
what this means is that at the end of the third day you would have no interest in the account because the money is not accrued into your account (doesn't belong to you) until the end of the month.
if you need to know how it actually happens, you should to to your local bank and ask them the same question.
you may or may not earn interest on a daily basis.
the interest will not be compounded (entered as principal) until the compounding period has elapsed.
Answer by ikleyn(52847)  (Show Source):
You can put this solution on YOUR website! .
Sim invests $9000 at 2% per annum compound interest compounded yearly.
What is his amount at the end of third day?
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The amount at the end of the third day will remain the same $9000, as it was
at the first day.
This amount will be changed at the end of the year, ONLY,
since the compounding is made only at the end of the year, according to the problem.
This problem is an elementary trap to check if a reader
does understand the meaning of the terms that he/she reads.
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