Calculate the compound interest earned when 8000 is invested for 9 months at 5% per annum compounded quarterly.
I'm confuse with this question because compounded quarterly means that every 4 months interest will be earned?
4 + 4 = 8 months
There is an extra 1 month . What do I have to do with it ?
My workings
A = $ 8000 ( 1 + (5/3) / 100 )^2 = 8002.22$
Another doubt I have is that do I divide the per annum rate by 3 if the question wants compounded quarterly ?
How do I do this question? Thanks in advance ..
A quarter refers to a quarter of a year, or $3$ months.
So $9$ months is $3$ quarters.
And the quarterly rate is $\frac{5}{4} \%$.
The interest earned will therefore be $\$8000((1 + \frac{5}{400})^3 - 1) \approx \$303.77$