QQuestionMathematics
QuestionMathematics
"If interest is compounded quarterly, how many times a year is it compounded?
A. Four
B. One
C. Twelve
D. Two"
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Answer
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Step 1:I'll solve this problem step by step:
Step 2:: Understand the Term "Compounded Quarterly"
- The term "quarterly" means four times per year - Quarterly refers to dividing the year into four equal periods (quarters) - Each quarter represents 3 months of the year
Step 3:: Break Down the Meaning of Quarterly Compounding
- When interest is compounded quarterly, it means the interest is calculated and added to the principal four times in a single year - This occurs once every three months (every quarter)
Step 4:: Count the Number of Compounding Periods
- 1st quarter: January-March - 2nd quarter: April-June - 3rd quarter: July-September - 4th quarter: October-December
Step 5:: Determine the Correct Answer
- The number of times interest is compounded is 4 times per year
Final Answer
Four The key point is that "quarterly" always means four times per year, regardless of the specific financial context.
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