Compound Interest Qld

In the Compound Interest formula A stands for

• Amount of time in years

• Amount of interest charged in $

• Value of investment/Loan at end of term

• Amount of interest as a %

In compound interest the time n is always in years

• True

• False

In compound interest the i is substituted as a decimal per annum

• True

• False

If an investment is made at 6% p.a. over 2 years compounding quarterly

then n should be entered as

• n = 2

• n = 24

• n = 4

• n = 8

In Compound Interest you find the Interest charged using the formula 

• I = A - P

• A = P(1 +i)ⁿ

• I = Pin

If interest at 5%p.a. is compounded monthly then i should be entered as

• i = 5/12

• i = 5

• i= 0.05

• i = 0.05/12

If interest is compounded monthly then n should be

• number of years

• number of months

• number of weeks

• number of days

$6000 is invested for 3 years at 5% p.a. compounding annually.

The working for this should be

• I = 6000x 0.05 x 3

• A = 6000(1 + 0.05)³

• A =

  6000(1 + 5/12)³⁶

If $3500 is invested for 2 years at 7% p.a. compounding monthly, the working to determine the Final value of the investment is

• A =

  3500(1+0.07)²

• A =

  3500(1 +0.07/12)²

• A =

  3500(1+0.07/12)²⁴

• I =

  3500 x 0.07/12 x 24

Calculate the final value of an investment of $2000 at 4%p.a. for 1 year compounding weekly.

Remember the dollar sign and if necessary give answer to 2 decimal places

Answer explanation

2000(1+0.04/52)⁵²