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20 February, 05:29

You deposit 12,000 in an account that pays 5% interest compounded quarterly.

A. Find the future value after one year

B. Use the future value formula for simple interest to determine the effective annual yield

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  1. 20 February, 07:14
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    P is the principal amount, $12000.00.

    r is the interest rate, 5% per year, or in decimal form, 5/100=0.05.

    t is the time involved, 3 ... month (s) time periods.

    Since your interest rate is "per year" and you gave your time interval in "month (s) " we need to convert your time interval into "year" as well.

    Do this by dividing your time, 3 - month (s), by 12, since there's 12 months in 1 year.

    So, t is 0.25 ... year time periods.

    To find the simple interest, we multiply 12000 * 0.05 * 0.25 to get that:

    The interest is: $150.00

    Usually now, the interest is added onto the principal to figure some new amount after 3 month (s),

    or 12000.00 + 150.00 = 12150.00. For example:

    If you borrowed the $12000.00, you would now owe $12150.00

    If you loaned someone $12000.00, you would now be due $12150.00

    If owned something, like a $12000.00 bond, it would be worth $12150.00 now.
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