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13 May, 07:50

You plan to deposit $100 per week into a fund that pays interest of 6% per year, compounded quarterly. Identify the interest period, compounding period, and the number of times interest is compounded per interest period.

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  1. 13 May, 08:20
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    Interest period (t) = 1 year

    Compounding period (CP) = 1

    The number of times interest is compounded in an interest period (m) = 4

    Explanation:

    Interest period (t) is the period for which the interest is mentioned.

    The interest rate here is 6% per year, therefore interest period is 1 year.

    Compounding period (CP) is the time frame for which the interest compounded or earned. The interest here is compounded quarterly, therefore the compounding period is 1 quarter.

    The number of times interest is compounded in an interest period (m) is given by the number of compounding periods that are in the interest period. There are 4 quarters in a year, therefore the number of times interest is compounded in an interest period is 4 quarters in a year.
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