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Suppose you invest​ $1,000 today, compounded​ quarterly, with the annual interest rate of​ 5.00%. what is your investment worth in one​ year?

Respuesta :

asadullahgiki
Amount invested today=P =$1,000
Annual interest rate=r =5%

Concept:
First, find the effective quarterly rate which is r/m, m=no. of quarters in a year which is equal to four.
 effective quarterly rate= r/m =5/4 =1.25%
now, no. of period is equal to n=4 (reason: 4 quarter in a year for which effective rate of 1.25% used)
Now,
Investment in one year = F= 1,000(F/P, 1.25%, 4)
                                           = 1,000(1.0509) 
                                           = $1050.9

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