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Question 25000: Someone Please help me with this one!!!!!!!!!!
Suppose you depost $10,000 for 2 years at a rate of 10%.
calculate the return (A) if the bank compounds annually (n=1)
calculate the return(a) if the bank compunds quarterly (n=4)
calculate the return (A) if the bank compounds monthly (n=12)
calculate the return(a) if the bank compounds daily (n=365)
What obervations can you make about the increase in our return as your compounding increases more frequently?
If a bank compounds continuous, then the formula takes a simpler, that is A=Pe^rt
where e is a constant and equals approximately 2.7183
Calculate A with continuous compounding.
Now suppose, instead of knowing t, we know that the bank returned to us 15,000 with the bank compunding continuously. Using logarithms, find how long we left money in the bank (find t)
How long will it take to double my money at 10 & interest rate and continous compunding what is the answer???????
Thanks to all
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! It will help if you have a calculator and know how to use it.
The formula for compound interest is:
A = P(1+r/n)^(nt)
For your compound interest problems P=$10,000,
r = 0.1; you are given a value for n for each problem;
t=2. Plug in those values and find "A" for each value of n.
For the continuous compounding use the formula.
For the $15000 situation you have the following
15000=10000e^(0.1t)
1.5 = e^(0.1t)
Take the natural log of both sides to solve for "t".
ln (1.5) = 0.1t
t = [ln(1.5)] / 0.1
I don't have a calculator with me so I'll leave this to you.
Cheers,
stan H.
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