You invest $1,050.00, buying stock in a company at $10.00/share. The shares increase in value by 13% the first year and decrease
2 answers:
Answer:
$
Step-by-step explanation:
The current price of a unit share is $ and the total amount invested is
$
Total number of shares purchased
In the first year, the share increased by 13%, thus the value of a unit share after first year is
$
% of
$)
$
In the second year, the share decreased by 5%, thus the value of a unit share after second year is
$
% of
$)
≈$
Thus the total value of shares after 2 years is
$
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Answer:
Bank B because the more often you compound interest, the more interest you earn.
Step-by-step explanation:
Bank A compounds the interest once a year.
Bank B compounds the interest twice a year.
Let's create an example of two investments of the same amount of money, the same interest rate, and the same time. The only difference will be the number of times the interest is compounded per year.
Compound interest formula:
where
A = future value
P = principal invested
r = interest rate
t = number of years
n = number of times interested is compounded in 1 year
Example:
P = $1000
r = 5%
t = 5 years
Bank A: n = 1
Bank B: n = 2
Bank A:
Bank B:
Bank A's investment is worth $1276.28 after 5 years, but Bank B's investment is worth $1280.08 after the same 5 years. Compounding twice per year instead of only once per year earns more interest.