Question

$100 is borrowed at 9% interest per year. How much is owed after one year if interest is compounded :

a. annually?
b. monthly?
c. continuously?

Answer 1

Explanation:

a). Formula to be used,

A = P(1 + i)ⁿ

= 100(1 + 0.09)¹

= $109

b). Formula to be used,

A =
`P(1+(i)/(12))^(12n)`

=
`100(1+(0.09)/(12))^(12* 1)`

=
`100(1+0.0075)^(12)`

= 100 × 1.0938

= $109.38

(c). Formula to be used,

A =
`Pe^(i* n)`

=
`100e^(1* 0.09)`

=
`100(e)^(0.09)`

= $109.42