Question

For each of the following, determine the interest rate per compounding period. 1) 12% per year, compounded weekly b) 8% per year, compounded bi-weekly c) 6% per year, compounded monthly

Answer 1

Using compound interest, the rates per compounding period are given as follows:

a) 0.1273 = 12.73%.

b) 0.0833 = 8.33%

c) 0.0617 = 6.17%

What is compound interest?

The amount of money earned, in compound interest, after t years, is given by:

$A(t) = P\left(1 + \frac{r}{n}\right)^{nt}$

In which:

• A(t) is the amount of money after t years.

• P is the principal(the initial sum of money).

• r is the interest rate(as a decimal value).

• n is the number of times that interest is compounded per year.

The interest rate per compounding period is given as follows:

$\left(1 + \frac{r}{n}\right)^n - 1$

For item a, the parameters are:

r = 0.12, n = 52.

Hence:

$\left(1 + \frac{0.12}{52}\right)^{52} - 1 = 0.1273$

For item b, the parameters are:

r = 0.08, n = 104.

Hence:

$\left(1 + \frac{0.08}{104}\right)^{104} - 1 = 0.0833$

For item c, the parameters are:

r = 0.06, n = 12.

Hence:

$\left(1 + \frac{0.06}{12}\right)^{12} - 1 = 0.0617$

More can be learned about compound interest at brainly.com/question/25781328

#SPJ1