I have 2 questions which are stumping me.
Which simple interest rate is equal to the annual continuous interest
rate 8% if a certain amount of money is invested for 4 years?
Im having a problem with this one when it comes to the time of money invested. I cannot seem to incorporate this into my solution.
2)Which is rate would be preferred?
Two credit card companies offer 2 different rates for outstanding balance.
1.75% per month.
By looking at this question I am leaning towards 5.3% quarterly, but I cannot prove it.
Thanks in advance for any help
Thanks for the response, I figured I would want to make the right decision with my millions, might as well do something right since I couldn't win a cup in Toronto
Anyway, I appreciate your response on the questions. And to clarify I am pretty sure question 1 is implying basic simple interest with a compound each year. A=P(1+rt). I have tried to convert this using Effective rate of interest for compounding interest
and Effective rate of interest for continuously compounded interest
neither of these equations incorporate the fact that the investment was for a total of 4 years, telling me this is not the way to go. Any help is appreciated thank you.
Don't they have an Old Men's Hockey League in Sweden?
OK; cpd continuous after 4 years:
e^(.08 * 4) = 1.3771... a dollar is worth ~1.38
Because of the "4 years" being specified, I'm pretty sure the question
means NO compounding at any time:
the the annual non-cpd rate is simply .3771 / 4 = .094275; ~9.43%
But if we use cpd annually then:
(1 + i)^4 = 1.3771
i = 1.3771^(1/4) - 1 = .08328....; ~8.33%
EDIT: I see you got it...
But you get same results after 1 year cpd continuous:
e^(.08) = 1.08328
So they must mean SIMPLE SIMPLE SIMPLE.... interest.
Investing your $10 million:
8% continuous: interest 4 years = 3,771,277
8% truly simple:interest 4 years = 3,200,000
I'll take half as your investing agent...
May I have an advance...NOW?
EDIT: I see you got it!