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How to compute Compound Interest Quarterly Video Lecture | SSC CGL Tier 2 - Study Material, Online Tests, Previous Year
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FAQs on How to compute Compound Interest Quarterly Video Lecture - SSC CGL Tier 2 - Study Material, Online Tests, Previous Year
| 1. How do you calculate compound interest quarterly? |  |
Ans. To calculate compound interest quarterly, you can use the formula:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment/loan
P = the principal amount (initial investment/loan)
r = annual interest rate (in decimal form)
n = number of times interest is compounded per year
t = number of years
| 2. What is compound interest and how does it differ from simple interest? | |
Ans. Compound interest is the interest that is calculated on both the initial principal amount and the accumulated interest from previous periods. It grows exponentially over time. On the other hand, simple interest is only calculated on the initial principal amount and remains constant throughout the investment/loan period.
| 3. Can you provide an example of how to calculate compound interest quarterly? | |
Ans. Sure! Let's say you have an initial investment of $5,000 with an annual interest rate of 5%, compounded quarterly for 3 years.
Using the formula A = P(1 + r/n)^(nt), we can calculate the future value of the investment as follows:
A = 5000(1 + 0.05/4)^(4*3)
A = 5000(1 + 0.0125)^(12)
A = 5000(1.0125)^12
A ≈ $5,863.63
So, the future value of the investment after 3 years will be approximately $5,863.63.
| 4. How frequently is compound interest usually compounded? | |
Ans. Compound interest can be compounded at different frequencies, depending on the terms of the investment/loan. Common compounding frequencies include annually, semi-annually, quarterly, monthly, and daily. The more frequent the compounding, the faster the investment will grow.
| 5. Is compound interest always beneficial for investors? | |
Ans. Compound interest can be beneficial for investors over the long term, as it allows the investment to grow exponentially. However, the benefit also depends on factors such as the interest rate, compounding frequency, and the investment period. It's important for investors to consider these factors and compare them with other investment options to make informed decisions.
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