Answer:
- The number of interest periods for quaterly compounding interests for 4 years is: 16
Explanation:
To calculate compounding interests, you must know the number of times the interest is going to be compounded.
You must know that <em>quarterly</em> means four in a year.
The number of interest periods,n, is equal to the number of interest periods in one year multiplied by the number of years.
- n = number of years × number of periods / year
When the interests are calculated once in a year, the number of interest periods for 1 year is: 1 year × 1 period / year = 1 period.
When the interest are calculated four times in a year, and the number of years is 3, then the number of of interest periods is: 3 years × 4 period / year = 12 periods.
This table,with some examples, may help you more:
Compounding periods per year # years # interest periods
Annual 1 1 1 × 1 = 1
Quarterly 4 1 4 × 1 = 4
Semiannually 2 1 2 × 1 = 2
For this problem:
- Compounding: quarterly
- Number of periods per year: 4
- Number of years: 4
- Number of interest periods: 4 periods/year × 4 year = 16 periods.
