Question

Find the compound interest if RM1000 is invested for five years at an annual interest rate of 7%
compounded :
a) quarterly
b) monthly
c) weekly

Answer 1

Compound Interest

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

$A(t)$ = amount after years

$P$ = principal

$r$ = interest rate per year

$n$ = number of times interest is compounded per year

$t$ = number of years

Given $P=RM1000, r=0.07,t=5$

a) $n=4$

$$A(5)=RM1000(1+\dfrac{0.07}{4})^{4(5)}=RM1414.78$$

$$CI=RM1414.78-RM1000=RM414.78$$

b) $n=12$

$$A(5)=RM1000(1+\dfrac{0.07}{12})^{12(5)}=RM1417.63$$

$$CI=RM1417.63-RM1000=RM417.63$$

c) $n=52$

$$A(5)=RM1000(1+\dfrac{0.07}{52})^{52(5)}=RM1418.73$$

$$CI=RM1418.73-RM1000=RM418.73$$