Question 93147This question is from textbook
: I am in need of great assistance...calling on experts for this pitiful student. I don't get algebra, I don't get it..I don't get it......My mind is flying with variables that I cannot think straight. I have been working on this problem for two days (screaming)....
11.)The formula for calculating the amount of money returned for an initial deposit into a bank account or CD (certificate of deposit) is given by
A = P(1+r/n)^nt
A is the amount of the return.
P is the principal amount initially deposited.
r is the annual interest rate (expressed as a decimal).
n is the number of compound periods in one year.
t is the number of years.
Carry all calculations to six decimals on each intermediate step, then round the final answer to the nearest cent.
Suppose you deposit $2,000 for 5 years at a rate of 8%.
a)Calculate the return (A) if the bank compounds annually (n = 1). Round your answer to the hundredth's place.
b)Calculate the return (A) if the bank compounds quarterly (n = 4). Round your answer to the hundredth's place.
c)Does compounding annually or quarterly yield more interest? Explain why.
d)If a bank compounds continuously, then the formula used is A=Pe^rt
where e is a constant and equals approximately 2.7183.
Calculate A with continuous compounding. Round your answer to the hundredth's place.
e)A commonly asked question is, How long will it take to double my money? At 8% interest rate and continuous compounding, what is the answer? Round your answer to the hundredth's place.
I am totally lost with this. Can someone help me. S.O.S.
This question is from textbook
Answer by checkley75(3666)   (Show Source):
You can put this solution on YOUR website! A=2000(1+.08/1)^1*5
A=2000(1.08)^5
A=2000*1.469
A=$2,938.66 INTEREST FOR 5 YEARS PAID ANNUALLY.
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A=2000(1+.08/4)^4*5
A=200(1+.02)^20
A=2000(1.02)^20
A=2000*1.4859
A=$2,971.89 INTEREST FOR 5 YEARS PAID QUARTERLY.
QUARTERLY PAYMENTS ARE GREATER BECAUSE YOU ARE EARNING INTEREST ON INTEREST QUICKER. BY QUARTERS RATHER THAN BY YEAR.
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ASSUMING YOU WANT A 5 YEAR INVESTMENT COMPOUNDED CONTINUOUSLY @ 8% THEN:
A=2000*2.7183^.08*5
A=5436.6^.4 CAN'T CONTINUE AS I HAVE RUN OUT OF STEAM HERE ON THE FRACTIONAL EXPONENT. SORRY.
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