Question

Suppose you had an interest rate of 12%. If you began with $21 CAD, how much would you have at the end of the year if interest was:

(a)

Simple?

(b)	Compounded quarterly?

(c)	Compounded monthly (1/12 of a year)?

(d)	Compounded weekly (1/52 of a year)?

Answer 1

a)simple = 21 (1 + r)^n

= 21(1 + 0.12)^1

= 23.52

b) Componded Quarterly

Anuual Interest to be divided by 4 to get quarterly interest, so 12/4 = 3 per quarter

= 21 (1 + 0.03)^4

= 23.6356

c) Compunded monthly

Anuual Interest to be divided by 12 to get monthly interest, so 12/12 = 1 per month

= 21 (1 + 0.01)^12

= 23.6633

d)Compounded weekly

Anuual Interest to be divided by 52 to get weekly interest, so 12/52 = 0.2307 per week

= 21 (1 + 0.002307)^52

= 23.6733

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