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You invest $600 in an account that has a annual interest rate of 7%, compounded quarterly for four years. What is the equivalent interest rate, and how many times will the money be compounded?
1.75% and 1 time
5.7% and 4 times
1.75% and 16 times
5.7% and 16 times

Sagot :

semsee45

Answer:

1.75% and 16 times

Step-by-step explanation:

Compound interest formula:

[tex]\sf A=P(1+\frac{r}{n})^{nt}[/tex]

where:

  • A = final amount
  • P = initial principal balance
  • r = annual interest rate (in decimal form)
  • n = number of times interest applied per time period
  • t = number of time periods

Given:

  • P = $600
  • r = 7% = 0.07
  • n = 4
  • t = 4

Substituting given values into the formula:

[tex]\sf \implies A=600(1+\frac{0.07}{4})^{4 \times4}[/tex]

          [tex]\sf =791.9576107...[/tex]

Equivalent interest rate:

[tex]\sf \implies \dfrac{r}{n}= \dfrac{0.07}{4}=0.0175=1.75 \%[/tex]

Number of times compounded:

[tex]\sf \implies nt=4 \times 4=16[/tex]

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