Question

Select the formulas that give the amount P in the account after the first period.

a.) P=1.005Po
b.) P=1.02Po
c.) P=Po(0.02/4)
d.) P=Po(4.02/4)
e.) P=Po(1+ 0.02/4)

Answer 1

The amount is calculated by the formula
P=Po(1+r/100)^n, where r is the rate of interest, Po is the principal amount and n is the interest period.
In this case, r = 0.02, p.a
Therefore, for the first quarter, r= 0.02/4 or 0.005
Hence the amount after the first quarter or period will be
P= 1.005Po or
P= Po(1+0.02/4)
Hence, the answer is either a or d