<PRE><B>Question 116745</B>
Suppose you deposit $4000 for 8years at a rate of 7% 
A) calculate the return(A) if the bank compounds annually(n=1) round to hundredth place 
A(t) = P(1+r/n)^(nt)
A(8) = 4000(1+0.07/1)^(1*8 =$6872.75
--------------------
B)calculate the return(A) if the bank compounds monthly (n=12) round to nearest hundredth place 
A(8)= 4000(1+(0.07/12))^(12*8)
A(8)= 4000(1.0058)^(96)= $6969.10
----------------------------
C) Does compounding annually or monthly yeild more interest? explain why
monthly because, although you compound at a smaller rate, compounding 
more ofterm more than offsets the difference.
------------------------------- 
D)If a bank compounds continuously then the formula used is A(t)=Pe^rt where e is a constant and equals approximately 2.7183 
Calculate A with continuous compounding. round to nearest hundredth place
A(8) = 4000e^(0.07*8)
A(8) = 4000*1.7507
A(8) = $7002.69
---------------------- 
E) How long will it take to double my money at 7% interest rate and continuous compounding. round to the nearest Hundredth place 
8000 = 4000e^(0.07t)
2 = e^(0.07t)
0.07t = ln2
t = (ln2)/(0.07)
t = 9.90 years
=======================
Cheers,
Stan H.
</PRE>