Calculate the return (A) if the bank compounds annually (n = 1). Use ^ to indicate the power.
Calculate the return (A) if the bank compounds quarterly (n = 4). Round your answer to the hundredth's place.
Calculate the return (A) if the bank compounds monthly (n = 12). Round your answer to the hundredth's place.
Calculate the return (A) if the bank compounds daily (n = 365). Round your answer to the hundredth's place.
What observation can you make about the size of increase in your return as your compounding increases more frequently?
2007-06-21 01:57:05 · 5 answers · asked by alesia h 1 in Science & Mathematics ➔ Mathematics
Future rate of a present sum:
FV = PV(1+r)^n
where FV equals the future sum
PV = Present sum
r = interest rate compounded for each time period
n = number of compounding periods
Annual Compounding = 20000(1+.08)^3 = $25194.24
Quarterly compounding = 20000(1+.02)^12 = $25364.84
Monthly Compounding= 20000(1+.0066666)^36 =$25404.74
Daily Compounding =
20000(1+.00021918)^1095= $25424.31
Conclusion: The more compounding periods there are, the more interest you make.
2007-06-21 04:19:49 · answer #1 · answered by Baysoc23 5 · 0⤊ 0⤋
Compounded Annually = $25,194.24
Compounded Quarterly = $25,364.84
Compounded Monthly = $25,404.74
Compounded Daily = $25,424.31
Make your own observations....
2007-06-21 09:09:32 · answer #2 · answered by rscanner 6 · 0⤊ 0⤋
F = P(1+i)^n
F = 20000 (1.08)^n
compounded annually, n=3 in 3 years
F = 25194.24
compounded quarterly, n=12 for 3 years
F = 50363.40
compounded monthly, n=36 for 3 years
F = 319363.44
compounded daily, n=1095 for 3 years
F = 7.94 E40
2007-06-21 09:12:22 · answer #3 · answered by Enginurse 2 · 0⤊ 1⤋
I would say that the bank is not forfilling its plain language legal requirement.
I would 'then' examin intent and value, after wich I would debate calling a class action or trust lawsuit.
2014-02-15 11:48:36 · answer #4 · answered by Ben 1 · 0⤊ 0⤋
it will increase in geometric progressions
2007-06-21 09:03:18 · answer #5 · answered by ps 3 · 0⤊ 1⤋