You have $2000 to invest for 5 years. Which of the following investment plans would give the most money after this time? how much will each be worth?

(1)
4.02% annual interest compounded quarterly.

(2)
3.99% annual interest compounded continuously.

Question

You have $2000 to invest for 5 years. Which of the following investment plans would give the most money after this time? how much will each be worth?

(1)
4.02% annual interest compounded quarterly.

(2)
3.99% annual interest compounded continuously.

mertsj · Answer

$$A=P(1+\frac{r}{n})^{nt}$$

anonymous · Answer

for #2 i think this is how its done not sure though...
2000e^(0399)(5)

mertsj · Answer

$$A=2000(1+\frac{.0402}{4})^{4(5)}=$2442.80$$

mertsj · Answer

Yes.  You are correct for number 2

anonymous · Answer

How do i get the exact answer for #2?

anonymous · Answer

also how did you get that 4? is #1?

mertsj · Answer

Multiply .0399 by 5 and hit you e^x button on you calculator.  Multiply the result by 2000

mertsj · Answer

It is compounded quarterly so there are 4 compounding periods per year.

anonymous · Answer

oh alright I get it now. Thanks a lot for the help. It's really appreciated.

mertsj · Answer

yw

anonymous · Answer

alright so the answer is $2441.58? how do i calculate the one you did on a calculator?

mertsj · Answer

Divide .0402 by 4.  Add 1.  raise that answer to the power of 20.  Multiply the result by 2000.

anonymous · Answer

alright.. thanks again.