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Aiden invested $98,000 in an account paying an interest rate of 2 3/8% compounded
continuously. Autumn invested $98,000 in an account paying an interest rate of 2 3/4%
compounded quarterly. After 11 years, how much more money would Autumn have in
her account than Aiden, to the nearest dollar?

Sagot :

Answer:

Aiden will have $17878 more than autumn

Step-by-step explanation:

For Aiden;

Formula for continuous compounding is;

FV = Pe^(rt)

P = 98000

r = 2⅜% = 0.02375

t = 11

Thus;

FV = 98000 × e^(0.02375 × 11)

FV = 127258.1218

For Autumn;

Formula for regular compounding;

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

Where;

PV is present value = 98000

r is rate = 2¾% = 0.0275

n is number of times amount is compounding = quarterly = 4

t is time in years = 11

Thus;

FV = 98000 + (1 + (0.0275/4))^(4 × 11)

FV = 98001.3518

Difference in their compounded amounts after 11 years is;

127258.1218 - 98001.3518 = 29256.77 ≈ $17878

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