If You Deposit $100 Now with Interest Rate of 3

question 95

Essay

If you deposit $100 now with interest rate of 3 percent, after the first period you will have an amount equal to (100 + 100× 0.03) = 100(1 + 0.03); after the second period the amount will be 100(1 + 0.03) + [100(1 + 0.03)]×0.03 = 100(1 + 0.03)(1 + 0.03) = 100(1 + 0.03)2. If we continue this reasoning, we find out that the amount in the account after n periods is equal to $100(1 + 0.03)n. In general, if the interest rate is i percent, the formula for compound interest rate becomes (1 + i%/100)n. Suppose there is a tax rate of t percent on interest income. How does our formula change?

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Definitions:

Self-deception

The act of lying to oneself or convincing oneself of a truth that is actually false.

Societal Norms

The shared expectations and rules that guide the behavior of people within social groups and communities.

Attribution Theory

The psychological theory that explains how people infer the causes of their own and others' behavior, attributing it to either internal dispositions or external situations.

F-ratio

A statistical measure used in ANOVA tests to compare the variance among group means to the variance within groups.