I'm having a hard time with this problem?

4) 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





4A 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 $4,000 for 8 years at a rate of 7%.





a) Calculate the return (A) if the bank compounds annually (n = 1). Round your answer to the hundredth's place.





Answer:





Show work in this space. Use ^ to indicate the power or use the Equation Editor in MS Word.








b) Calculate the return (A) if the bank compounds monthly (n = 12). Round your answer to the hundredth's place.





Answer:





Show work in this space





c)Does compounding annually or monthly yield more ?

I'm having a hard time with this problem?
I won't give you your entire answer, but I will help a little bit.





a) 1st Year return is $280.00 = $4,000 x 0.07


Compound each year after that (add principal to earned interest and multiply by 7%)





b) 1st Year return is $289.16 = $4,000(1+.07/12)^12


c) More frequent compounding will result in a higher yield every time, as long as everything else is held constant.





Good luck!
Reply:A) A=P(1+(r/n))^nt


A=4000(1+(.007/1))^(1)(8)


A=4000(1.007)^8


you can take if from there





B) A=4000(1+(.007/12))^(12)(8)


A=4000(1.00058)^96


again, you can take it from here





C) just find out which of the 2 is the larger number
Reply:A) A=P(1+(r/n))^nt


A=4000(1+(.007/1))^(1)(8)


A=4000(1.007)^8
Reply:You have the formulae, why cant you do it yourself:





A=P(1+r/n)nt


1) A=P(1+r/n)nt


= 4000(1+ .07)^8


=4000(1.07)^8


=4000(1.7181861798319201)


=6872.7447193276804


=$6872.75





2)A=P(1+r/n)nt


=4000(1+.07/12)^8*12


=4000(1+0.0058)^96


=4000(1.0058)^96


=4000(1.7478)


=6991.2$





Clearly the second yields more.





TW K

memory cards