asked 231k views
3 votes
"You deposit $12,000 today into an account that pays you 12% annual interest, compounded daily. How much MORE will you have in 40 years, than if the compounding was only computed annually (as opposed to daily)

asked
User Mounhim
by
7.7k points

1 Answer

1 vote

Answer:

$340,363.55

Step-by-step explanation:

you need to calculate the future value of your deposit:

future value = present value x (1 + interest rate)ⁿ

  • present value = $12,000
  • interest rate = 12% / 365 = 0.032877%
  • n = 40 x 365 = 14,600

future value = $12,000 x (1 + 0.032877%)¹⁴⁶⁰⁰ = $1,456,975.20

if the interest is compounded annually, the future value = $12,000 x 1.12⁴⁰ = $1,116,611.65

the difference = $1,456,975.20 - $1,116,611.65 = $340,363.55

answered
User Sammiepls
by
7.7k points
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