The Johns have $50,000 to invest for 18 months

How much money will they have in 18 months if they invest the money in a certificate paying interest at the nominal rate of 5% compounded quarterly?

Thanks!

Printable View

- Sep 28th 2009, 08:58 AMlil_cookieInvestment Problem
The Johns have $50,000 to invest for 18 months

How much money will they have in 18 months if they invest the money in a certificate paying interest at the nominal rate of 5% compounded quarterly?

Thanks! - Sep 28th 2009, 09:09 AMWilmer
Compounded quarterly means every 3 months;

so there are 18 / 3 = 6 compounding periods: understand?

During 1 year there are 4 quarters; so rate evety quarter = 5 / 4 = 1.25%.

So the $50000 will accumulate to : 50000*(1 + .0125)^6

Fyi, standard formula is : A(1 + i)^n ; got that? - Sep 28th 2009, 09:21 AMlil_cookie
Awesome, that is what I thought it was just wanted to make sure...thank you!