SOLUTION: You have $500 in your savings account. Suppose you have a choice of keeping your money for five years in a savings account with a 2% interest rate, or in a five year certificate o

Question 178354: You have $500 in your savings account. Suppose you have a choice of keeping your money for five years in a savings account with a 2% interest rate, or in a five year certificate of deposit with and interest rate of 4.5%. Calculate how much interest you would earn with each option over five years time with continuous compounding.
Answer by EMStelley(208) (Show Source): You can put this solution on YOUR website!
The first thing we need to know for this problem is the formula for continuous compounding. With an initial amount (principal) of P, a rate r, and a time t, the amount is

So for our first situation, P=500, r=0.02, and t=5. So the amount in the account after 5 years would be

So the amount of interest would be 552.59-500=$52.59.
For the second situation, P=500, r=0.045 and t=5.

So the amount of interest would be 626.16-500=$126.16.
RELATED QUESTIONS
Take the current amount you have in your checking or savings account. Suppose you have a (answered by nycsub_teacher)

Can you please help me with this? Thank you so much! Take the current amount you have (answered by solver91311)

Please help! This is my last assignment and I'm having trouble! Below the paragraph is... (answered by cartert)

Suppose you have $1600 in your savings account at the end of a certain period of time.... (answered by addingup)

Suppose you have $2350 in your savings account at the end of a certain period of time.... (answered by VFBundy)

Suppose you have $1350 in your savings account at the end of a certain period of time.... (answered by Boreal)

Suppose you have $2150 in your savings account at the end of a certain period of time.... (answered by ikleyn)

Suppose you invested $1000 at a 7.1% simple annual interest rate. You have accumulated... (answered by mananth,math_tutor2020)

Suppose you have $1350 in your savings account at the end of a certain period of time.... (answered by math_tutor2020)