Finance Chapter on Interest Formulas
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Questions and Answers

What is the formula for compound interest when compounded quarterly?

  • a(1 + r/2)^2c
  • a(1 + r/12)^12c
  • a(1 + r)^c
  • a(1 + r/4)^4c (correct)

    • The formula for continuously compounded interest is A = Pe^rt.

    True

    What does the variable 'n' represent in the compounded interest formula?

    The number of times interest is compounded per year.

    For simple interest calculated once a year, the formula is ___.

    <p>a(1+r)</p> Signup and view all the answers

    Match the type of compounding frequency with its corresponding formula:

    <p>Annual = a(1 + r/n)^nc Semi-annual = a(1 + r/2)^2c Monthly = a(1 + r/12)^12c Quarterly = a(1 + r/4)^4c</p> Signup and view all the answers

    What does 'e' represent in the formula for continuously compounded interest?

    <p>Euler's number</p> Signup and view all the answers

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