FNGR 1 | Lesson 2 | Practice (Compound Interest)Solution

1. 

  1. year 1:   \(5000(1.05) = 5250\) ; quarterly:  \(5000\bigg(1 + \dfrac{.05}{4}\bigg)^4\)year 2:  \(5000(1.05)^2 =5512.50\); quarterly: \(5000\bigg(1 + \dfrac{.05}{4}\bigg)^8\)year 3:  \(5000(1.05)^3 = 5788.13\); quarterly: \(5000\bigg(1 + \dfrac{.05}{4}\bigg)^{12}\)year 4:  \(5000(1.05)^4 = 6077.53\); quarterly: \(5000\bigg(1 + \dfrac{.05}{4}\bigg)^{16}\)
  2. Earnings:  \(5000\bigg(1 + \dfrac{.05}{n}\bigg)^{nt}\); where \(n\) is the number of times per year that the interest is calculated and \(t\) is the number of years.
  1. Simple interest is \(5000 + 5000(.05)(5) = 6250\)

    Compounded daily:  \(5000\bigg(1 + \dfrac{.05}{360}\bigg)^{360\cdot5}= 6420.25\)


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