$100.00 for three years. This implies you receive $100.00 every year for 3 years.
Let's adjust our payment period to equal our compound period by multiplying 3 by 4 (since there are 4 quarters per year).
Now we should be able to set this problem into a notation such as
100(P/A,3%,12)
(Use interest factor tables or actual formulas)
100(9.954)=
$995.40
Guest #2
Is that the "new math" you are using for a very simple financial question? Just see what CPhill did and learn from it.
Well look more into my description Guest... I've assumed it's $100.00 per year for 3 years. Maybe a better explanation of the question would equal a better answer.
Even if it is a single deposit of $100.00 Cphill is wrong...
100(1+(.03/12)^12) = $103.04
You say " I've assumed it's $100.00 per year for 3 years" Even if you were right, what is $100 per year for 3 years??? $100 x 3 =$300 + interest. So, where did $995.40 come from? Of course, your assumption is wrong, because this question is very clear to those of us who regularly deal with such simple questions.
Hmm it seems your response shows your knowledge of economics. The term compounding refers to interest which gathers interest... You can't just multiply by 3 silly. The reason I set compound period equal to the payment period is an easy way to get the effective interest rate.
If you think that $100 is per quarter, then this is the formula you would use, "Mr. Economist"!
FV=P{[1 + R]^N - 1/ R}
FV =$100 x {[1 + 0.03/4]^(3*4) - 1 / (0.03/4)}
FV = $100 x {[1.0075]^12 - 1 / 0.0075}
FV =$100 x {0.0938069... / 0.0075}
FV =$100 x 12.5075863.........
FV =$1,250.76 - And that is what you would have if it were $100 per quarter !!.
