2. Saving and Investing
Compound Interest — Quiz
Test your understanding of compound interest with 5 practice questions.
Practice Questions
Question 1
A deposit of \1500 is invested at a nominal interest rate of 4\% compounded monthly for 2 years, then reinvested at a nominal rate of 5\% compounded quarterly for an additional 3 years. What is the final account balance?
Question 2
At a continuous compounding rate of 6\% per annum, how many years are required for an investment to quadruple in value?
Question 3
Which account yields a higher balance after 5 years on a \2000 deposit: Account A offers a nominal 4.5\% rate compounded semiannually; Account B offers a nominal 4.4\% rate compounded monthly? Approximately how much greater is the higher balance?
Question 4
What nominal annual interest rate, compounded semiannually, produces the same account balance after 8 years as an account earning 5\% interest compounded continuously?
Question 5
An account offers a nominal 6\% annual interest rate compounded monthly. What nominal rate, compounded daily (365 days per year), is needed to achieve the same effective annual yield?