If the three-month interest rate was a quarter of the 12 month interest rate, then you would earn more interest. By extension, the shorter the subdivisions of time, the better off the investor would be.
But this calculation is based on dividing the annual interest by four for a three month period. That is how simple interest works, but not compound interest. No financial company is going to fall for that! Their 3-moth rate will be based, not on a quarter, but on the fourth root of the annual rate.
Thus, if the annual rate is r%
the quarterly rate will be 100*[(r/100 + 1)0.25 - 1] %
The calculation looks more complicated than it is due to (a) the need to convert percentage into fractions (why 100 crops up), and (b) to include the original capital to start off and then to exclude it (why the +1 and -1 come in).
So, if r = 4% annually, then the quarterly rate will not be 1% but 0.98534% (approx). If the exact figure were used, then the four quarters, compounded, would equal exactly 4%. But there are no bets on whether the deposit taker will round that fraction up or down!
$44,440.71
Compounded.
No. There is no formal word to express the adjectives compound or compounded as an adverb.
10001/999900
It is an element and it is thus "not compounded" with another element(s)
Simple interest (compounded once) Initial amount(1+interest rate) Compound Interest Initial amount(1+interest rate/number of times compounding)^number of times compounding per yr
The more often interest is compounded (the shorter the interval), the faster the total value of the investment grows, and the more it's worth after any given period of time.
The thief compounded his problems by resisting arrest.
I can give you several sentences.Your back-talk only compounded your trouble, young man!He compounded the amount of work he'd have to do.The pharmacist compounded a special lotion for her rash.
We still need to know how often the interest is compounded ... Weekly ? Daily ? Hourly ? What does "continuous" mean ?
Compound Interest = P(1+r/100n)(nt) P = Original Investment r = Interest Rate n = How often the interest is compounded per year t = Number of years Interest = 200(1+6/100)6 = 200(1.06)6 =$283.70
1257