Question

10. If you must calculate the present value of an amount at 12% compounded quarterly for 2 years, then the interest factor used in the calculation is a. 3% for eight periods b. 12% for eight periods c. the interest factor for 12% for two periods divided by 4 d. None of these choices

Answer 1

Answer:

Rate of interest will be 3 %

And number of periods will be 8

So option (a) will be correct option

Explanation:

We have given rate of interest = 12 %

And time period = 2 years

We have rate of interest is the money is compounded quarterly

When money is compounded then we divide the rate of interest by 4 and multiply time period by 4

So rate of interest for quarterly will be $=\frac{12}{4}=3$ %

And number of periods will be $=2\times 4=8period$

So option (a) will be the correct answer