Question 1167471
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Kenneth ran into some money and decides to invest it for retirement. He has $75,000 to invest over
40 years. Find the effective rates given:
(a) 4.5% growth compounded monthly.
(b) 4.45% growth compounded continuously.
(c) Should Kenneth invest in option (a) or option (b)? Why?
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To compare, calculate the effective rates per year.


(a)  effective rate per year is  {{{(1+0.045/12)^12}}} = 1.045939825.


(b)  effective rate per year is  {{{e^0.045}}} = {{{2.71828^0.045}}} = 1.046027828.


(c)  The effective annual rate is greater in case (b),  so it is logical/(more profitable) to choose option (b).
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Solved.