Question

3. Calculate the amount at the end of one year in each case. Which one is the best option?

a. Principal = $1,000. The rate of interest per annum is 9% and the interest is calculated
semi-annually. (Note: annum is another word to say year)
b. Principal = $1,000. The rate of interest per annum is 9% and the interest is
calculated quarterly.

Answer 1

Answers:

(a) $1092.03

(b) $1093.08

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Work shown for part (a)

A = P*(1+r/n)^(n*t)

A = 1000*(1+0.09/2)^(2*1)

A = 1000*(1+0.045)^(2)

A = 1000*(1.045)^(2)

A = 1000*1.092025

A = 1092.025

A = 1092.03

Don't forget to round to the nearest penny, aka nearest hundredth.

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Work shown for part (b)

A = P*(1+r/n)^(n*t)

A = 1000*(1+0.09/4)^(4*1)

A = 1000*(1+0.0225)^(4)

A = 1000*(1.0225)^(4)

A = 1000*1.09308331878906

A = 1093.08331878906

A = 1093.08