Problem Solving (PS) | An investor opened a money market account with a single deposit of $60

Here is a detailed solution to understand the basics - 

1stQuarter

• P =6000
• CI for the 1st quarter =$125
• CI formula =P(1+r/400)-P
• CI =6000(1+r/400)-6000
• So r = 8.33% for the 1stQuarter

2ndQuarter

• P = 6125 (as we reinvested the $125 CI from the 1stquarter)
• CI for the 2nd quarter =$130
• CI formula =P(1+r/400)-P
• CI =6125(1+r/400)-6125
• So r = 8.48% for the 2nd Quarter

3rdQuarter

• P = 6125+130 = 6255 (as we reinvested $130again)
• CI for the 3rd quarter =$145
• CI formula =P(1+r/400)-P
• CI =62551+r/400)-6255
• So r = 9.27% for the 3rd Quarter

4thQuarter

• P = 6255+145 =6400
• CI for the 4th quarter = 10% of overall 12 months (600) - 400 (for 9 months) =200
• CI formula =P(1+r/400)-P
• CI =6400(1+r/400)-6400
• So r = 12.5% for the 4thQuarter

A = 12.5%
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Statistics : Posted by Raman109 • on 29 Dec 2009, 13:28 • Replies 26 • Views 21506

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