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Forums › ACCA Forums › ACCA MA Management Accounting Forums › Compounding interest quarterly
Dear Sir,
Although this question is one of the basics from capital budgeting, I’m getting two different answers. Please assist me in answering the following:
If a single sum of $12000 is invested at 8% per annum with interest compounded quarterly, the amount to which the principal will have grown by the end of year three is approximately
A. 15117
B. 9528
C. 15219
D. 30924
I’m ending up with the answers A and C. I don’t know which one is right. I’ve tried two different methods and although they should yield the same answer, I’m getting a different one when switching methods. 🙁
8% per annum is 2% per quarter.
3 years is 12 quarters, and so it will have grown to 12,000 x (1.02^12) = 15,219