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Math Help - compound interest

  1. #1
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    Thumbs up compound interest

    Kevin wishes to deposit $3,000 for a period of two years for a special purpose. After
    visiting several banks and investigating his options, he has selected three plans:
    A. 6.5% interest per year compounded daily
    B. 6.55% interest per year compounded monthly
    C. 6.6% interest per year compounded quarterly
    (a) Which plan will earn Kevin the most money?
    (b) How much will he lose if he chooses the worst plan?
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  2. #2
    A riddle wrapped in an enigma
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    Quote Originally Posted by math321 View Post
    Kevin wishes to deposit $3,000 for a period of two years for a special purpose. After
    visiting several banks and investigating his options, he has selected three plans:
    A. 6.5% interest per year compounded daily
    B. 6.55% interest per year compounded monthly
    C. 6.6% interest per year compounded quarterly
    (a) Which plan will earn Kevin the most money?
    (b) How much will he lose if he chooses the worst plan?
    Hi math321,

    Put it in the compound interest formula and see.

    A=P\left(1+\frac{r}{n}\right)^{nt}

    P = principal amount (the initial amount you deposit)
    r = annual rate of interest (as a decimal)
    t = number of years the amount is deposited.
    A = amount of money accumulated after n years, including interest.
    n = number of times the interest is compounded per year
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  3. #3
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    tanks i solved it

    but im working on another one

    11. Jim invests $22,000 of his retirement savings in CD that pays 6.85% annual interest
    compounded monthly. When will the CD be worth $35,000? Hint: Use logarithms.
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  4. #4
    A riddle wrapped in an enigma
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    Quote Originally Posted by math321 View Post
    tanks i solved it

    but im working on another one

    11. Jim invests $22,000 of his retirement savings in CD that pays 6.85% annual interest
    compounded monthly. When will the CD be worth $35,000? Hint: Use logarithms.
    Same formula:

    A=P\left(1+\frac{r}{n}\right)^{nt}

    35000=22000\left(1+\frac{.0685}{12}\right)^{12t}

    Solve for t.

    \frac{35}{22}=\left(\frac{120685}{120000}\right)^{  12t}

    \log\frac{35}{22}=12t \log \frac{120685}{120000}

    12t=\frac{\log\frac{35}{22}}{\log\frac{120685}{120  000}}

    t=\frac{\log\frac{35}{22}}{\log\frac{120685}{12000  0}} \div 12
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