Results 1 to 4 of 4

Math Help - compounded interest

  1. #1
    Newbie
    Joined
    Oct 2007
    Posts
    21

    compounded interest

    Suppose you have a choice of keeping $500 for five years in a savings account with a 2% interest rate, or in a five year certificate of deposit with and interest rate of 4.5%. Calculate how much interest you would earn with each option over five years time with continuous compounding.

    for the first part, would it be A(5)=500*e(.02*5/100)
    A(5)=2550.5?
    that doesnt seem right to me, but im not sure what else to do.
    Follow Math Help Forum on Facebook and Google+

  2. #2
    Member
    Joined
    May 2006
    Posts
    244
    Quote Originally Posted by brandilee View Post
    Suppose you have a choice of keeping $500 for five years in a savings account with a 2% interest rate, or in a five year certificate of deposit with and interest rate of 4.5%. Calculate how much interest you would earn with each option over five years time with continuous compounding.

    for the first part, would it be A(5)=500*e(.02*5/100)
    A(5)=2550.5?
    that doesnt seem right to me, but im not sure what else to do.
    Check what you are doing and your arithmetic. The formula is wrong, and if
    that is what you evaluated you did it wrong, nor is it the result of evaluating
    the correct formula.

    ZB
    Follow Math Help Forum on Facebook and Google+

  3. #3
    Newbie
    Joined
    Oct 2007
    Posts
    21
    what formula should i be using?
    Follow Math Help Forum on Facebook and Google+

  4. #4
    Member
    Joined
    May 2006
    Posts
    244
    Quote Originally Posted by brandilee View Post
    what formula should i be using?
    you could try either 500*e^(2*5/100) or 500*e^(0.02*5)

    ZB
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Compounded Interest and Mortgage
    Posted in the Business Math Forum
    Replies: 7
    Last Post: July 12th 2010, 09:30 AM
  2. compounded interest
    Posted in the Pre-Calculus Forum
    Replies: 13
    Last Post: December 23rd 2009, 08:30 AM
  3. Interest, compounded quarterly..
    Posted in the Pre-Calculus Forum
    Replies: 2
    Last Post: July 7th 2009, 07:02 AM
  4. compounded interest
    Posted in the Business Math Forum
    Replies: 3
    Last Post: March 20th 2008, 08:04 AM
  5. Compounded Interest Question
    Posted in the Pre-Calculus Forum
    Replies: 1
    Last Post: September 19th 2007, 12:23 AM

Search Tags


/mathhelpforum @mathhelpforum