The formula for determining interest compounded monthly is A = P(1 +r/12 )^(12t), where A represents the amount invested after t years, P the principal invested, and r the interest rate. Jimmy invests $2,000 at an interest rate of 10% for 4 years, while Jenny invests $2,000 at an interest rate of 5% for 8 years. Determine the amount of return gained by Jimmy and Jenny. Summarize your results from Part 1, including how you arrived at your answer.

Question

The formula for determining interest compounded monthly is A = P(1 +r/12 )^(12t), where A represents the amount invested after t years, P the principal invested, and r the interest rate. Jimmy invests $2,000 at an interest rate of 10% for 4 years, while Jenny invests $2,000 at an interest rate of 5% for 8 years.  Determine the amount of return gained by Jimmy and Jenny. Summarize your results from Part 1, including how you arrived at your answer.

kira_yamato · Answer

For Jimmy: P = 2000, r = 0.1, t = 4
A(Jimmy) = 2000(1 + 0.1/12)^(12(4)) = $2978.71
Gain from interest = $(2978.71 - 2000) = $978.71

For Jenny: P = 2000, r = 0.05, t = 8
A(Jenny) = 2000 (1 + 0.05/12)^(12(8)) = $2981.17
Gain from interest = $(2981.17 - 2000) = $981.17