Suppose that you have $6940 to invest. Which investment yields the greater return over 4 years: 9.45% compounded quarterly or 9.5% compounded semiannually?

Question

The accumulated value of the 9.45% investment is .

The accumulated value of the 9.5% investment is .


The investment at ______% compounded _______ yield a greater return.

Answer 1

A = p(1+r/n)^nt

 

6940, 4 years, 9.45%, quarterly:::

A = 6940(1+.0945/4)⁴⁽⁴⁾

A = $10,083.55

 

6940, 4 years, 9.5%, semiannually:::

A = 6940(1+.095/2)²⁽⁴⁾

A = $10,059.86

 

The 9.45% interest quarterly returns more money