SOLUTION: How much more would be in an account that has interest compounded continuously rather than annually if the initial deposit is $500 and the yearly interest rate is 7% for 10 years?

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Question 1179708: How much more would be in an account that has interest compounded continuously rather than annually if the initial deposit is $500 and the yearly interest rate is 7% for 10 years?
Answer by ikleyn(52847)   (Show Source): You can put this solution on YOUR website!
.

For the continuously compounded account, the annual growth factor is

     =  = 1.072508  (approximately).



For the annually compounded account, the annual growth factor is

    1 + 0.07 = 1.07.



The difference between amounts the problem asks for, is

     -  = 23.30 dollars.    ANSWER

Solved.

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I could solve this problem in one line, using the standard formulas.

But I decided to present it in more detailed form to make it more educational for you.


/////////////


For discetely and continuously compounded account,  look into these two lessons
    - Compounded interest percentage problems
    - Problems on discretely compound accounts
in this site, and learn the subject from there.


After reading these lessons, you will tackle such problems on your own without asking for help from outside.

Also,  you have this free of charge online textbook in ALGEBRA-I in this site
    - ALGEBRA-I - YOUR ONLINE TEXTBOOK.

The referred lessons are the part of this online textbook under the topic "Logarithms".


Save the link to this online textbook together with its description

Free of charge online textbook in ALGEBRA-I
https://www.algebra.com/algebra/homework/quadratic/lessons/ALGEBRA-I-YOUR-ONLINE-TEXTBOOK.lesson

to your archive and use it when it is needed.


Happy learning (!)



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