Question

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

Answer 1

Options :

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:

a.) P=1.005Po

d.) e.) P=Po(1+ 0.02/4)

Explanation:

From the compound interest formula:

P = P0(1 + r/n)^t

Rate = 2% = 2/100 = 0.02

n = Number of compounding times per period, quarterly ; n = (12 /3) months

P = P0(1 + 0.02/4)^1

P = p0(1 + 0.02/4)

Simplifying further :

P = P0(1 + 0.005)

P = p0(1.005)