Answer:
Step-by-step explanation:
Part A
If it is compounded quarterly, the interest of 1.5 must be cut into a quarter of its present size. 1.5 //4 = 0.375 % per quarter.
In addition, the number of times that payment will be received is
4 quarters * 5 years = 20 quarters.
i = principle (1 + 0.375/100) ^20
i = principle (1 + 0.00375)^20
The principle = 4000 dollars.
i = 4000 * (1.00375)^20
i = 4000 * 1.07773
i = 4310.93
So she's tied up 4000 dollars to make 300 dollars.
Part B
I can't really give you an answer to this because I don't know if the 7% is compounded and over what period of time if it is, or if they mean 7% annually. There's a lot of variation in this question. Most people don't take money out of the market, so if it compounded, the formula would be
New Principle = starting amount (1.07)^4
New Principle = 4000 * 1.07^4
New Principle = 5243.18 so she would make about 4 times as much as the 300 she makes if she puts the money in a bond.
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If the interest is simple interest
Gain would be 0.07 * 4000 = 280 dollars.
Over four years = 4*280 = 1120 dollars.
You are going to have to ask your teacher what is intended by this question.
