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 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 $3,000 for 9 years at a rate of 6%.
a) Calculate the return (A) if the bank compounds annually (n = 1). Round your answer to the hundredth's place.
Show work. Use ^ to indicate the power or use the Equation Editor in MS Word.
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
where e is a constant and equals approximately 2.7183.
Calculate A with continuous compounding. Round your answer to the hundredth's place.
Could someone please help with these problem?
a) A = 9000*(1+.06)^9
A = 15205.31
b) A = 9000*(1+.06/4)^(9*4)
A = 15,382.26
c) When compounding annually no quarter's interest can itself gain interest until after the end of the whole year. So, compounding quarterly gains faster than annually at the same annual interest rate.
d) No equation shows up on my old Internet Explorer.
your ol' granddad, Curious Cat.
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