Use the appropriate compound interest formula to find the amount that will be in each account, given the stated conditions. $26,500 invested at 3.85 % annual interest for 2 years compounded (a) daily (n equals 365); (b) continuously

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Business

Melany French

17 December, 07:38

Use the appropriate compound interest formula to find the amount that will be in each account, given the stated conditions. $26,500 invested at 3.85 % annual interest for 2 years compounded (a) daily (n equals 365); (b) continuously

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Brendon Durham · Answer 1

= $26.5000 * (1 + 0,0104%) ^ (365*2)

Explanation:

First of all, you have to convert the 3,85% annual interest rate in a daily interest rate because n = 365.

1) = ((1+annual interest) ^ (1/n)) - 1

= ((1+3,85%) ^ (1/365)) - 1

= 0,0104% it the result of the daily interest rate

Secondly, you need to use the compund interest formula according with the invested money

2) = Capital invested * (1 + daily interest rate) ^ (365 x numbers of years)

= $26.5000 * (1 + 0,0104%) ^ (365*2)

= $26.5000 * (1 + 0,0104%) ^ (365*2)

= $26.5000 * 107,85%

= $28.580,78

Finally, as you can see the compunded interest formula is elaborated by the information of the daily interest rate calculated first, multiplied by the days of the year (n) and the numbers of the years (2) that the investing is going to be generating profits.