(a) Explanation Given: The principal is $ 60 , 000 , one investment offers 7% compounded quarterly, and another offer 6.75 % compounded continuously for 5 years. Formula Used: Principal of P dollars is invested at an annual interest rate r compounded n times per year. Then, the amount A accumulated after t years is given by the following formula: A = P ( 1 + r n ) n t And, if the principle P is invested at an annual interest rate r compounded continuously, then the amount A accumulated after t years is given by the following formula: A = P e r t Calculation: For plan 1 st , The principal of P dollars is invested at an annual interest rate r compounded n times per year. Then, the amount A accumulated after t years is given by the following formula: A = P ( 1 + r n ) n t It is given that: P = $ 60 , 000 , r = 0.07 , t = 5 years , and n = 4 . Therefore, A = P ( 1 + r n ) n t = 60000 ( 1 + 0 (b) To determine To calculate: The difference in amount earned by both plans if the principal is $ 60 , 000 , and one investment offers 7% compounded quarterly, whereas another offers 6.75 % compounded continuously for 5 years.

Mathematical Ideas (13th Edition) - Standalone book

13th Edition

ISBN: 9780321977076

Author: Charles D. Miller, Vern E. Heeren, John Hornsby, Christopher Heeren

Publisher: PEARSON

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Question

Chapter 8.6, Problem 47E

(a)

To determine

To calculate: The investment that will earn more profit if one investment offers 7% compounded quarterly, and another offers 6.75% compounded continuously for 5 years on a principal of $60,000.

(b)

To determine

To calculate: The difference in amount earned by both plans if the principal is $60,000, and one investment offers 7% compounded quarterly, whereas another offers 6.75% compounded continuously for 5 years.

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Chapter 8.6, Problem 46E

Chapter 8.6, Problem 48E

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The investment that will earn more profit if one investment offers 7% compounded quarterly, and another offers 6.75 % compounded continuously for 5 years on a principal of $ 60 , 000 .

Solution Summary: The author explains that one investment offers 7% compounded quarterly, and another offers 6.75% for 5 years on a principal of 60,000.