Question

Suppose $15,000 is invested in an account with an APR of 4.6%.

If the interest is compounded annually, how much interest is earned over the first 12 years?

If the interest is compounded monthly, how much interest is earned over the first 12 years?

If the interest is compounded daily, how much interest is earned over the first 12 years?

If the interest is compounded continuously, how much interest is earned over the first 12 years?

Answer 1

Explanation:

P=Po(1+(r/n)^nt,

t=time in years

r=rate

n=number of compoundings per year

=17000(1+.046)^12, round at the end = $29162.79

Annually = 15000 (1+(.046/12))^144 = $29493.15

Monthly = 15000 (1+.046/365))^(365*12) = $29523.26

Daily = Poe^(rt)=Poe^(.552) = $29524.29

interest earned is each of the above minus $15000 that was the principal.