Question

I can't make excel figure out the continuous interest. (#4)

You plan to invest $2,100 in an individual retirement arrangement (IRA) today at a nominal Compounding frequency and time value Personal Finance Problem annual rate of 8%, which is expected to apply to all future years. a. How much will you have in the account at the end of 9 years if interest is compounded (1) annually, (2) semiannually, (3) daily (assume a 365-day year), and (4) continuously? b. What is the effective annual rate, EAR, for each compounding period in part a? c. How much greater will your IRA balance be at the end of 9 years if interest is compounded continuously rather than annually? d. How does the compounding frequency affect the future value and effective annual rate for a given deposit? Explain in terms of your findings in parts a through c. a. (1) The amount you will have in the account at the end of 9 years if interest is compounded annually is $ 4197.91. (Round to the nearest cent.) (2) The amount you will have in the account at the end of 9 years if interest is compounded semiannually is $ 4254.21. (Round to the nearest cent.) (3) The amount you will have in the account at the end of 9 years if interest is compounded daily is $ 4313.97. (Round to the nearest cent.) (4) The amount you will have in the account at the end of 9 years if interest is compounded continously is $ 4.314 31. (Round to the nearest cent.)

Answer 1

a]

All of the answers are correct

#4]

Future value with continuous compounding = amount invested * ert

where r = nominal annual rate

t = number of years

Future value = $2,100 * e0.08*9

Future value = $4,314.31