Bunuel wrote:

If $600,000 is invested at 12% annual interest compounded monthly, what will be the total value of the investment after one quarter of the year?

A. $672,000.00

B. $624,362.41

C. $618,180.60

D. $618,000.00

E. $606,000.00

As the calculation looks a bit tricky, we'll estimate first.

This is an Alternative approach.

Let's say we had simple interest. 12% annual interest compounded monthly means 1% per month.

Then the total interest after one quarter (= 3 months) would be 600,000*3% = 18,000

So our answer needs to be a bit more than 618,000.

Most likely this is (C) and if we're short on time we should mark it and move on.

To calculate fully we can write

1st month interest - 600,000 * 1% = 6,000

2nd month interest - 606,000 * 1% = 6,060

3nd month interest - 612,060 * 1% = 6,120.6

Giving 618,180.60

(C) is our answer.

_________________

David

Senior tutor at examPAL

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