Compound Interest Calculation Quiz
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Questions and Answers

What is the difference between the amount compounded annually and the amount compounded semi-annually after 4.5 years?

  • $8000 \left(1 + \frac{10}{100}\right)^{4.5} - 8000 \left(1 + \frac{10}{100}\right)^{2 \times 4.5}$
  • $8000 \left(1 + \frac{10}{2 \times 100}\right)^{4.5} - 8000 \left(1 + \frac{10}{100}\right)^{2 \times 4.5}$
  • $8000 \left(1 + \frac{10}{2 \times 100}\right)^{4.5} - 8000 \left(1 + \frac{10}{2 \times 100}\right)^{2 \times 4.5}$
  • $8000 \left(1 + \frac{10}{100}\right)^{4.5} - 8000 \left(1 + \frac{10}{2 \times 100}\right)^{2 \times 4.5}$ (correct)

    • What is the effective annual rate when the interest is compounded semi-annually at 10%?

  • $\left(1 + \frac{0.10}{2}\right)^2 - 1$ (correct)
  • $\left(1 + 0.10\right)^2 - 1$
  • $\left(1 + \frac{0.10}{2}\right) - 1$
  • $\left(1 + 0.10\right) - 1$

    • What is the future value of an investment of $8000 after 3 years when the interest is compounded annually at 8%?

  • $8000\left(1 + \frac{8}{100}\right)^3$ (correct)
  • $8000\left(1 + \frac{8}{3\times100}\right)^3$
  • $8000\left(1 + \frac{8}{100}\right)^{3/12}$
  • $8000\left(1 + \frac{8}{12\times100}\right)^3$

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