Question

John deposited $10,000 today in a bank where the interest rate is 4%.
(a) How much will he have after 7 years if the interest is compounded quarterly?
(b) How much will he have after 7 years if the interest is compounded continuously?
(c) How long does it take to triple his money if the interest is compounded continuously?
****please explain how you got your answers***

Answer 1

Do you have the concept of compound interest?

Answer 2

no that's whats confusing me

Answer 3

Okay. To find compound interest formula used is
A=P(a\1+r)^n
I=A-P

Answer 4

ok

Answer 5

But when it is given compounded quarterly than you have to multiply 4 to n and divide 4 from r as their are 4 quarters in one year

Answer 6

im still confused could you write out the formula for me

Answer 7

The formula is the same but you can derive it as follows for compounded quarterly like this;
A=P(1+r/2)n/2

Answer 8

but how do I plug it in?

Answer 9

You have got the values in your question
n=7 years
P=$10000
r=4%=0.04
put these values in the above formula

Answer 10

ok what about for parts b and c?

Answer 11

does the formula change?

Answer 12

In part b you should use the simple formula\[A=Pe ^{rt}\]

Answer 13

And the same one in c also

Answer 14

what gets plugged in for t? time?

Answer 15

In compound interest t and n have the same meaning time. Here t/n=7

Answer 16

oh ok thankyou