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# \$100.00 for 3 years at 3% compounded quarterly

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\$100.00 for 3 years at 3% compounded quarterly

Jun 20, 2017

#1
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100 (1 + .03/4)^(3 * 4)  = \$109.38

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

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.

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