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What does it mean by interest is compounded continuously and paid quarterly?
Normally, you have an interest rate, r, over some specified period (typically a month, quarter or year) and an amount Y that is invested (or loaned) for n periods. Then the total value, V, of the investment is: V = Y*(1 + r/100)^n It is possible to chop up the total time interval into smaller intervals and adjust the interest rate correspondingly so that the total percentage change over a year remains the same. The above equation then takes the form V = Y*e^ax The statement in the question simply means that, instead of calculating the interest using the first formula, it is calculated using the second. The interest is then paid out every three months and so every three months the capital returns to the value Y.
What is every three months called?
a quarter of a year
Which do you prefer a bank account that pays 5 percent per year EAR for three years or an account that pays 2.5 percent every six months for three years?
The latter of the two would be your better option, assuming the interest is properly compounded. Consider. In the first case, your resulting payment would be: P * 1.053 = P * 1.157625, or a total gain of just over 15.76% In the second case, your resulting payment would be: P * 1.0256 = P * 1 .159693418212890625, for a total gain of just over 15.96%
What is the rate of interest if a certain sum of money at compound interest becomes Rs. 7396 in two years and Rs 7950.7 in three years. find the rate of interest?
The difference between 2 years and 3 years is another addition of the interest. 7396 × (1 + rate/100) = 7950.7 → rate = (7950.7/7396 - 1) × 100 = 7.5 % compounded per year.
John invests 10000 for three years at 10 percent compounded annually How much will John have after the three years?
13310
