Can the work be shown in excel using formulas? You deposit $10,000 in an account that...
Can the work be shown in excel using formulas?
You deposit $10,000 in an account that earns 5.5%
compounded continuously and your friend deposits $10,000 in an
account that earns 5.5% annually.
a. How much more will you have in the account in 10
years?
b. How much more interest did you earn in the 10
years?
Homework Answers
The compounded or Future value (A) in case of annually compounded and continuously compounded rate r over a period of t years on a principal amount P is given by
A = P* (1+r)^t ------ in case of Annually compounded and
A = P*exp (r*t) -------- in case of continuously compounded
Amount in my friend's account = 10000 * (1+0.055)^10 = $17081.44
Amount in my account = 10000 * exp(0.055*10) = $17332.53
a) After 10 years, I will have = 17332.53 - 17081.44 = $251.09 more in my account as compared to my friend
b) Difference in Interest = ($17332.53-$10000) + ($17081.44-$10000) =$251.09
I earned $251.09 more interest as compared to my friend
Shown in excel below
| Principal | Rate | Final Amount after 10 years | |
| My Friend | 10000 | 5.5% annually compounded | 17081.44 |
| Me | 10000 | 5.5% continuously compounded | 17332.53 |
| Difference in Amount | 251.0856 |
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