Use formula P = P () (1 + R/k)^ kt where r= interest rate k= compounding frequency per year t= time in yeras p() = initial amount of money ( Hint: Guess with the Rule of 72)
1. Compound Interest. Suppose $1,000 is invested at an annual interest rate of 7%. Compute the balance after 10 years if the interest is compounded
a. Annually
b. Quarterly
c. Monthly
d. Continuosly
2. How many years would it take for $1.00 to double if it is compunded annually at 5%?
3. Find the present value/ initial value of $20, 000 at 4% compounded quarterly for 9 years.
4. Find the effective interest rate if the interest rate is 3% compunded quarterly. Hint: r e = (1 + r / k ) ^k -1