The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
The total amount of interest compounded quarterly on a $1,500 note payable for 1 year at 12% is
A)$180.00
B)$187.50
C)$189.00
D)$ 45.00

Question

Quizplus · Accepted Answer

The interest is compounded quarterly, so the interest rate per period is 3% (12% annual rate divided by 4 quarters). Using the compound interest formula or tables, the future value factor for 4 periods at 3% is approximately 1.1255. The interest is then $1,500 * 1.1255 - $1,500 = $189.00.

The Solution to This Problem Requires Time Value of Money