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A total of $200,000 was deposited at a fixed annual interest rate which is compounded
quarterly. What is the interest of the first month?
1) The interest in the second month is 1 percent more than first month
2) The interest in the second month is $2 more than first month
Reference key: D
Guys this is what I think shud be the solution.
...........
First of all becoz' the interest is compounded quarterly it will be added to the principle
only after 3 months.
..........
Let P = 200,000
For the first month, the interest I1 = p*(r/100)*(1/12)
For first 2 months , the interest I2 = p*(r/100)*(2/12).
.....
Here we take P as the principle
and not P+I1 becoz' any interest will be added to the principle only after the 3rd month
and not before that as the rate is compounded quarterly and not after every month.
............
We have from option B , I2 = I1+2
Solving this equation we can get the rate r.
........
and hence the interest
Now for option A.
..............
wer have I2 = I1+I1*(1/100)
Solving this also r can be obtained and hence the interest for the first month.
...
Hence the answer to this shud be D.
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Ricardo deposits $1,000 in a bank account that pays 10%
interest, compounded semiannually. Poonam deposits $1,000 in
a bank account that pays 10% interest, compounded annually.
If no more deposits are made, what is the difference between
the two account balances after 1 year?
A. $2.50
B. $10
C. $5
D. $15
E. $100
Interest for first 6 months(compounded semiannually) = amount X rate X time
(1000)(10/100)(6/12) = $50. So, amount + interest = $1000 + $50 = $1050
Interest for remaining 6 months = (1050)(10/100)(6/12) = $52.50
Amount after 1 yr in Ricardo's account = $1050 + $52.50 = $
1102.50
Poonam:
Interest for the year (compounded annually) = (1000)(10/100)(1) = $100
Total amount after 1 yr in Poonam's account = $1000 + $100 =
$1100
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View Full DocumentTherefore, difference = $1102.50  $1100 =
$2.50
A 2 year certificate of deposit is purchased for K dollars. If the
> certificate earns interest at an annual rate of 6 percent compunded
> quarterly, which of the following represents the value, in dollars,
> of teh certificate at the end of the 2 years?
>
> a) (1.06)2 K
> b) (1.06)8 K
> c) (1.015)2 k
> d) (1.015)8 k
> e) (1.03)4 k
S= P(1 +i/m)^nm, where P = principal, i = interest rate, n = # of years, m = # of compounding.
Since the compounding is done quarterly, there will be 4 periods i.e m = 4
Therefore S = k(1 +0.06/4)^2*4
=k(1.015)^8
D is the answer.
A 2year certificate of deposit is purchased for k dollars. If the certificate earns interest at an annual rate of
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 Spring '11
 M
 Physics

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