The-Organic-Chemistry-Tutor
The video discusses the comparison between two investments, one with a 7.3% interest rate compounded quarterly and the other with a 7.4% interest rate compounded annually, over a span of 10 years. The investment with compounding quarterly provides interest four times a year, resulting in greater returns due to the power of compounding, as compared to once a year with the annually compounded investment. The video also examines other factors that can increase the investment's rate of return, such as an increase in the interest rate, the frequency of interest payments, and the length of time the investment has been working.
In this section, the question is posed of which investment will yield a greater return over 10 years: 7.3% compounded quarterly or 7.4% compounded annually. Compounding quarterly means that interest payments are received four times a year, allowing for interest upon interest, while compounding annually only provides one interest payment per year. Through calculations using the formula A = P(1+r/n)^(nt), it is found that the investment of 7.3% compounded quarterly will yield a greater return than the investment of 7.4% compounded annually due to the higher rate of compounding. The factors that can increase the rate of return include an increase in the interest rate, the number of interest payments received per year, and the time the investment is working.
No videos found.
No related videos found.
No music found.