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Posted by Denis Borris on November 10, 2002 at 09:58:13:

In Reply to: Re: whadya mean? posted by Steve on November 09, 2002 at 00:10:34:

: : : Someone deposits \$50 each week into a savings account offering 7% interest
: : : compounded quarterly. What is the balance at the end of 1 year?
: : : (Note: 1 quarter = 13 weeks).
: : 2 ways to look at this, me boy:
: : gets NO INTEREST on the weekly deposit; so like 4 quarterly deposits
: : of \$650 (13 * 50)
: : OR
: : gets interest on his weekly deposit, calculated using .07/52, accumulated
: : to end of quarter, then credited
: : WHAT IS IT??????????????????
: Sorry. Interest is earned weekly and compounds quarterly.

Ok, take the 1st quarter or 13 week period:
at end of week1, \$50 is deposited: no interest yet
at end of week2, \$50 is deposited: interest of .07/52*50=.0673 earned
(that's interest on the 1st \$50 deposit)
...end of week13: interest so far = sum(1,2...12)*.0673 = 5.2494;
so account = 50*13 = 650 + 5.25 = 655.25
At this point, the 5.25 is actually "deposited" in the account;
and the same procedure continues during next 13 week period:
results in 655.25 * 2 = 1310.50 + .07/4*655.25 = 1321.97 : CORRECT??

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