Use the formula A $A = P \left( 1 + \frac { r } { n } \right) ^ { n t } \text { to solve. }$
-Suppose that you have $7000 to invest. Which investment yields the greater return over 6 years: 6.6% compounded monthly or 6.7% compounded quarterly?
A) $7000 invested at 6.6% compounded monthly over 6 years yields the greater return.
B) Both investment plans yield the same return.
C) $7000 invested at 6.7% compounded quarterly over 6 years yields the greater return.

Question

Quizplus · Accepted Answer

Using the formula $A = P \left( 1 + \frac { r } { n } \right) ^ { n t }$, we calculate the future value for both options. For 6.6% compounded monthly, $n = 12$ and $r = 0.066$, so $A = 7000 \left( 1 + \frac { 0.066 } { 12 } \right) ^ { 12 \times 6 }$. For 6.7% compounded quarterly, $n = 4$ and $r = 0.067$, so $A = 7000 \left( 1 + \frac { 0.067 } { 4 } \right) ^ { 4 \times 6 }$. Calculating both, the 6.7% compounded quarterly yields a greater return.

Use the Formula A A=P(1+rn)nt to solve. A = P \left( 1 + \frac { r } { n } \right) ^ { n t } \text { to solve. }A=P(1+nr​)nt to solve.

Use the Formula A $A = P \left( 1 + \frac { r } { n } \right) ^ { n t } \text { to solve. }$