Question

Assume you opened and deposited $1000.00 into a savings account that pays 4% per annum.

1. If the bank compounds interest annually, how much will you have in your account at the end of 3 years (assuming no deposits or withdrawals are made for 3 years)?
2. Find the balance if the bank compounds interest quarterly under the same conditions.
3. Find the balance if the bank compounds interest continuously under the same conditions.

Answer 1

Pg: - 0 A= P(1+ A: Future value P= Present Value Y: interest Rate to time period n: no- of times compound P: $ 1000 X= 4% n = compound yearly = 1 t: 3 (1) (A - 1000 As 1000 (1+0.04 )" = 1000 (1+0.0433 - 1000 X7.124864 - 1124.86 $1124-86 After 3 year it will be = (b) if Bank. compound. intrest Quaterly P- $1000 Ya 401 n=4 t-3

= 1000 (14 6.04413 = 1000 (1+0-01) = 1000% 1.12662 = 1126 82 After a year it will be - 11126.99 (0) Bornik. jotrest compound Continously A = Pest (: 6.271) € 0.0073 - 1000 - 1000 € 12 - 1000 2012 =1000 (2-71)*12 - 1000 1.12 708 = $1127.08 = $1127.08 After 3 year 1 will be $1127.08