How much more will an investment of $25,000 earning 7% compounded continuously for 4 years earn, compared to the same investent at 7% compounded monthly for 4 years?

Question

hero · Answer

To solve this problem you will need to know: 

1. The continuous compound interest formula
2. The monthly compound interest formula
3. How to input the components into the formula
4. properties of algebra

Which of these are you unfamiliar with?

anonymous · Answer

1,2 and 3?

hero · Answer

1. Continuous Compound Interest Formula

$$A = Pe^{rt}$$

2. Monthly Compound Interest Formula

$$A = P(1 + \frac{r}{n})^{nt}$$

A = Annual Interest Earned
P = Principal or Investment
r = percentage rate
t = years
n = no of times compounded

hero · Answer

n = no of times compounded per year*

hero · Answer

For example, 

semiannual = twice a year
monthly = 12 times per year
daily = 365 times a year

hero · Answer

Another note: percentages should be converted to their equivalent decimal form before inserting them into the formulas

hero · Answer

You should be able to solve it now.