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$100.00 for 3 years at 3% compounded quarterly

Guest Jun 20, 2017
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 #1
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100 (1 + .03/4)^(3 * 4)  = $109.38

 

 

cool cool cool

CPhill  Jun 20, 2017
 #4
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Are you correct?

Guest Jun 20, 2017
 #2
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$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 Jun 20, 2017
edited by Guest  Jun 20, 2017
 #3
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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.

Guest Jun 20, 2017
 #5
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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.

Guest Jun 20, 2017
 #6
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Even if it is a single deposit of $100.00 Cphill is wrong...

100(1+(.03/12)^12) = $103.04

Guest Jun 20, 2017
 #9
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No! It is compounded QUARTERLY!!. Which means you divide the interest rate by 4 and you will get:

0.03 /4 =0.0075 per QUARTER!. So, you will have this: $100 x 1.0075^12 =$109.38.

Guest Jun 20, 2017
 #11
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The formula is Effective i = ( 1 + r/m)^m -1

Notice how both 'm' are the same.

Guest Jun 20, 2017
 #7
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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. 

Guest Jun 20, 2017
 #8
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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.

Guest Jun 20, 2017
 #10
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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 !!.

Guest Jun 20, 2017
edited by Guest  Jun 20, 2017

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