Suppose that you have $6000 to invest. Which investment yields the greater return over 4 years: 8.25% compounded quarterly or 8.3% compounded semiannually?

1 Answer
G_Ozdilek
May 23, 2017

Of course quarterly investment yields more

Explanation:

Your final Money will be
#M_q=6000*(1+(0.0825/4))^(4*4)#
under compounded quarterly option. Note that there are four quarters in each year and your investment is 4 years.
#M_q=6000*1.3863=$8317.84#

Under semiannual option:
#M_s=6000*(1+0.083/2)^(4*2)#

Note that there are two semiannual periods in one year for a duration of 4 years.

#M_s=6000*1.3844#
#M_s=$8306.64#

Therefore, your quarterly compounding option yields more.

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