Question

A person invests $100,000 dollars at 8% for 10 years. How much money does the person have in their account if it is compounded....

a) annually
b) semi annually
c) quarterly
d) monthly
e) daily
f) continuously

i only need a, c, e, f

Answer 1

9514 1404 393

Answer:

a) $215,892.50

c) $220,803.97

e) $222,534.58

f) $222.554.09

Explanation:

The compound interest formula is ...

FV = P(1 +r/n)^(nt)

where principal P is invested at annual rate r for t years, compounded n times per year. In this problem, you have P=100,000, r=0.08, t=10, and the only variable of interest is n.

When calculations are repeated, it is often convenient to let a calculator or spreadsheet do them. You only need to program the formula once, then use it for the different values of the variable of interest. Most spreadsheets have this formula built in, so you don't even need to program it.

__

For continuous compounding, the formula is ...

FV = Pe^(rt)

FV = 100,000e^(0.08·10) = 222,554.09