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. To calculate the future value of an amount that is invested at 12%, compounded quarterly, at the end of three years, the interest factor used would be
A) 1% for 12 periods
B) 12% for three periods
C) 3% for 12 periods
D) 3% for four periods

Question

Quizplus · Accepted Answer

When interest is compounded quarterly, the annual interest rate is divided by four, resulting in a quarterly rate of 3%. Over three years, there are 12 quarters, so the interest factor is 3% for 12 periods.

The Solution to This Problem Requires Time Value of Money