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PLEASE HELP!!!

Compare the investment below to an investment of the same principal at the same rate compounded annually.

PLEASE HELP!!! Compare the investment below to an investment of the same principal-example-1
User Rama Rao M
by
8.1k points

1 Answer

6 votes

Answer:

$156.463

Explanation:

Given that :

Principal = 5000 ; interest rate (r) = 6% = 0.06 ; interest periods (n) = 4 ; number of years (t) = 12

The compound interest formula:

A = P(1 + r/n)^nt

Investment compounded periodically :

A = 5000(1 + 0.06/4)^(4 * 12)

A = 5000(1.015)^48

A = 5000(2.0434782)

A = 10217.391

Investment compounded annually :

A = P(1 + r/n)^nt

A = 5000(1 + 0.06)^12

A = 5000(1.06)^12

A = 5000(2.012196471835550329409536)

A = 10060.98235917775164704768

A = 10060.928

Difference :

10217.391 - 10060.928 = $156.463

User Kudeh
by
8.5k points

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