Question

60.April would like to invest $200 in the bank for one year. Three banks all have a nominal APR of 1.5%, but compound the interest differently.

c. Bank C compounds interest continuously. What would April’s balance be after one year with this bank?

Answer 1

$203.02

Explanation:

Since the bank in question compounds interest continuously, the following equation should be used to determine the final balance (B) in April's account:

`B= 200*e^(i*t)`

Where "e" is a mathematical constant approximated as 2.7183, "i" is the interest rate (1.5%) and "t" is the investment time in years (1):

`B= 200*e^(0.015*1)`

`B= 203.02`

April's balance would be $203.02 after one year.