SOLUTION: Kenneth ran into some money and decides to invest it for retirement. He has $75,000 to invest over
40 years. Find the effective rates given:
(a) 4.5% growth compounded monthly.
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40 years. Find the effective rates given:
(a) 4.5% growth compounded monthly.
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Question 1167471: Kenneth ran into some money and decides to invest it for retirement. He has $75,000 to invest over
40 years. Find the effective rates given:
(a) 4.5% growth compounded monthly.
(b) 4.45% growth compounded continuously.
(c) Should Kenneth invest in option (a) or option (b)? Why? Answer by ikleyn(52914) (Show Source):
You can put this solution on YOUR website! .
Kenneth ran into some money and decides to invest it for retirement. He has $75,000 to invest over
40 years. Find the effective rates given:
(a) 4.5% growth compounded monthly.
(b) 4.45% growth compounded continuously.
(c) Should Kenneth invest in option (a) or option (b)? Why?
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To compare, calculate the effective rates per year.
(a) effective rate per year is = 1.045939825.
(b) effective rate per year is = = 1.046027828.
(c) The effective annual rate is greater in case (b), so it is logical/(more profitable) to choose option (b).
