document.write( "Question 84045: Can anyone help me with this problem? I'm in an class and running on a dealine. I'm not very capable when it comes to this stuff so any help I can get will be appreciated. Thanks.\r
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document.write( "The formula for calculating the amount of money returned for deposit money into a bank account or CD (Certificate of Deposit) is given by the following:
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document.write( "A is the amount of returned
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document.write( "P is the principal amount deposited
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document.write( "r is the annual interest rate (expressed as a decimal)
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document.write( "n is the compound period
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document.write( "t is the number of years\r
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document.write( "Carry all calculations to 6 decimals on all assignments then round the answer to the
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document.write( "nearest cent.\r
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document.write( "Suppose you deposit $20,000 for 3 years at a rate of 8%.
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document.write( "a) Calculate the return (A) if the bank compounds annually (n = 1).
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document.write( "Answer:
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document.write( "b) Calculate the return (A) if the bank compounds quarterly (n = 4). Round your answer to the hundredth's place.
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document.write( "Answer:
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document.write( "c) Calculate the return (A) if the bank compounds monthly (n = 12). Round your answer to the hundredth's place.
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document.write( "d) Calculate the return (A) if the bank compounds daily (n = 365). Round your answer to the hundredth's place.
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document.write( "e) What observation can you make about the size of increase in your return as your compounding increases more frequently?
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document.write( "f) If a bank compounds continuous, then the formula becomes simpler, that is where e is a constant and equals approximately 2.7183. Calculate A with continuous compounding. Round your answer to the hundredth's place.
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document.write( "g) Now suppose, instead of knowing t, we know that the bank returned to us $25,000 with the bank compounding continuously. Using logarithms, find how long we left the money in the bank (find t). Round your answer to the hundredth's place.
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document.write( "h) A commonly asked question is, “How long will it take to double my money?” At 8% interest rate and continuous compounding, what is the answer? Round your answer to the hundredth's place.
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Algebra.Com's Answer #60492 by jim_thompson5910(35256)![]() ![]() ![]() You can put this solution on YOUR website! \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "a) \r \n" ); document.write( "\n" ); document.write( "Lets calculate the return if the bank compounds annually\r \n" ); document.write( "\n" ); document.write( "Let n=1 and plug it into \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "So our return is $25194.24 \n" ); document.write( "b) \r \n" ); document.write( "\n" ); document.write( "Lets calculate the return if the bank compounds quarterly\r \n" ); document.write( "\n" ); document.write( "Let n=4 and plug it into \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "So our return is $25364.84 \n" ); document.write( "c) \r \n" ); document.write( "\n" ); document.write( "Lets calculate the return if the bank compounds monthly\r \n" ); document.write( "\n" ); document.write( "Let n=12 and plug it into \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "So our return is $25404.74 \n" ); document.write( "d) \r \n" ); document.write( "\n" ); document.write( "Lets calculate the return if the bank compounds daily\r \n" ); document.write( "\n" ); document.write( "Let n=365 and plug it into \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "So our return is $25424.31\r \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "e) What observation can you make about the size of the increase in your return as your compounding increases more frequently?\r \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "As the compounding frequency increases, the return slowly approaches some finite number (which in this case appears to be about $12213.69). Think about it, banks wouldn't be too fond of shelling out an infinite amount of cash.\r \n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "f)Calculate A with continuous compounding\r \n" ); document.write( "\n" ); document.write( "Using the contiuous compounding formula \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "So using continuous compounding interest we get a return of $25425.02 (which is real close to what we got from a daily compounding frequency)\r \n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "g)Now suppose, instead of knowing t, we know that the bank returned to us $15,000 with the bank compounding continuously. Using natural logarithms, find how long we left the money in the bank (find t)\r \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "So we get\r \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "So it will take a little over 2 and a half years to generate $25,000\r \n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "h) A commonly asked question is, “How long will it take to double my money?” At 8% interest rate and continuous compounding, what is the answer?\r \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "Since we want to double our money, let A=2*20,000. So A=40,000. Now solve for t:\r \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "So we get\r \n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( "\n" ); document.write( " \n" ); document.write( " \n" ); document.write( "\n" ); document.write( "So it will take about 8 and a half years to double your money. \n" ); document.write( " |