Use the compound interest formulas A = Pert and A = P (1 + ) to solve. Suppose that you have $11,000 to invest. Which investment yields the greater return over 10 years: 6.25% compounded continuously or 6.3% compounded semiannually? Show your work

Question

Mathematics

Augustus Orr

30 September, 14:09

Use the compound interest formulas A = Pert and A = P (1 + ) to solve. Suppose that you have $11,000 to invest. Which investment yields the greater return over 10 years: 6.25% compounded continuously or 6.3% compounded semiannually? Show your work

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Answers (1)

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Carmen Park · Answer 1

Continuously

Step-by-step explanation:

Compounded continuously:

A = Pe^ (rt)

A = 11,000 e^ (0.0625 * 10)

A = 20,550.71

Compounded semiannually (twice per year):

A = P (1 + r) ^t

A = 11,000 (1 + 0.063/2) ^ (2*10)

A = 11,000 (1 + 0.0315) ^20

A = 20,453.96