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(52846) (Show Source):
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.
