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Question 1185171: Suppose that you have $9000 to
invest.
(a) If you invest it with the First National Bank at the nominal rate
of 5% compounded quarterly, find the accumulated amount at the
end of one year.
(b) The First National Bank also offers certificates on which it
pays 5.5% compounded continuously. However, a minimum
investment of $10,000 is required. Because you have only $9000,
the bank is willing to give you a 1-year loan for the extra $1000
that you need. Interest for this loan is at an effective rate of 8%,
and both principal and interest are payable at the end of the year.
Determine whether or not this strategy of investment is preferable
to the strategy in part (a).
Answer by Boreal(15235)   (Show Source):
You can put this solution on YOUR website! This is 9000(1+0.05/4)^4=$9458.51 after 1 year
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This is 10000*e^(0.055)=$10565.41
1000(1.08)=$1080
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The first leaves you with $9458.51
The second leaves you with $10565.41-$1080=$9485.41
This is slightly better (by about $27) than the first.
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