|
Question 33153This question is from textbook college algebra
: 0)
3)The formula for calculating the amount of money returned for an initial deposit money into a bank account or CD (Certificate of Deposit) is given by
A is the amount of returned.
P is the principal amount initially deposited.
r is the annual interest rate (expressed as a decimal).
n is the compound period.
t is the number of years.
Suppose you deposit $10,000 for 2 years at a rate of 10%.
a)Calculate the return (A) if the bank compounds annually (n = 1).
Answer:
Show work in this space. Use ^ to indicate the power.
b)Calculate the return (A) if the bank compounds quarterly (n = 4).
Answer:
Show work in this space
c)Calculate the return (A) if the bank compounds monthly (n = 12).
Answer:
Show work in this space
d)Calculate the return (A) if the bank compounds daily (n = 365).
Answer:
Show work in this space
e)What observation can you make about the increase in your return as your compounding increases more frequently?
Answer:
f)If a bank compounds continuous, then the formula takes a simpler, that is
where e is a constant and equals approximately 2.7183.
Calculate A with continuous compounding.
Answer:
Show work in this space
g)Now suppose, instead of knowing t, we know that the bank returned to us $15,000 with the bank compounding continuously. Using logarithms, find how long we left the money in the bank (find t).
Answer:
Show work in this space
h)A commonly asked question is, “How long will it take to double my money?” At 10% interest rate and continuous compounding, what is the answer?
Answer:
Show work in this space
This question is from textbook college algebra
Answer by Fermat(136)   (Show Source):
You can put this solution on YOUR website! This question has already been answered.
Copy and paste this following web address into your browser and click GO.
http://www.algebra.com/algebra/homework/word/finance/Money_Word_Problems.faq.question.25000.html
|
|
|
| |
