Income and Taxation
Unlock all 14 questions & worked solutions
You're viewing a free preview. Create an account to access the complete question set, step-by-step solutions, and progress tracking.
All Questions
Access the full question set for every topic.
Worked Solutions
Step-by-step explanations for every answer.
Track Progress
Mark questions right or wrong and monitor your growth.
It's Free
No credit card required - sign up in under a minute.
$3000 is invested for 18 months compounded at the interest rate of 0.75% every month. Give answer correct to the nearest cent, wherever necessary.
a. Calculate the final value of this investment
b. What is the increase in value obtained in part (a) as against investing the same amount for same time at same rate but at simple interest.
(a)
$$\begin{aligned}
\text{Pricipal Amount} & =\$3000\\
\text{Compunding Rate of Interest} &= 0.75\%~\text{p.m.}\\
\text{Time Period}&=18~\text{month}\\
\text{Total Amount,}~A &=\$3000 \times 1.0075^{18}\\
&\approx \$3431.88 \end{aligned}$$ (b) $$\begin{aligned}
\text{If same amount is invested for same time} & \text{but at a simple rate..}\\
\text{Amount} A^{\prime} & =\$3000(1+0.0075\times 18)\\
&=\$3405\\
\text{Increase in value obtained}&=\$3431.88-\$3405\\
&=\$26.88
\end{aligned}$$
📚 Want More Questions?
There are 13 more questions available. Create your free account to access the complete question set with detailed solutions.