Carry all calculations to six decimals on each intermediate step, then round the final answer to the nearest cent.
Suppose you deposit $2,000 for 5 years at a rate of 8%.
a) Calculate the return (A) if the bank compounds annually (n = 1). Round your answer to the hundredth’s place.
Calculate the return (A) if the bank compounds quarterly (n = 4). Round your answer to the hundredth’s place.
Does compounding annually or quarterly yield more interest? Explain why.
If a bank compound continuously, then the formula is A=Pe^rt, where e is a constant and equals approximately 2.7183.
Calculate A
Anna
A is the amount of returned.
P is the principal amount initially deposited.
r is the annual interest rate (expressed as a decimal).
n is the compound period.
t is the number of years.
Carry all calculations to 6 decimals on all assignments then round the answer to the nearest cent.
Suppose you deposit $10,000 for 2 years at a rate of 10%.
e)What observation can you make about the size of the increase in your return as your compounding increases more frequently?
f) If a bank compounds continuously, then the formula takes a simpler, that is A=PE where e is a constant and equals approximately 2.7183.
Calculate A with continuous compounding.
Joann
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