Question 997560: Karen received an inheritance from her grandparents and wants to invest the money. She is offered the following options of accounts to invest into:
•4.5% APR, compounded semi-annually
•4.3% APR, compounded daily
If Karen decides on the the first option, by what percent will her investment have increased after 10 years?
Having trouble understanding. Thanks.
Answer by Alan3354(69443)   (Show Source):
You can put this solution on YOUR website! Karen received an inheritance from her grandparents and wants to invest the money. She is offered the following options of accounts to invest into:
•4.5% APR, compounded semi-annually
FV = PV*(1 + r)^t
r = 4.5%/2
t = 20 half-years
FV = PV*(1 + 0.045/2)^20
FV = PV*1.56
--> 56% increase
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•4.3% APR, compounded daily
FV = PV*(1 + r)^t
r = 4.3%/365
t = 3650 days
FV = PV*(1 + 0.043/365)^3650
FV = PV*1.537
--> 53.7% increase
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If Karen decides on the the first option, by what percent will her investment have increased after 10 years?
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