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Ajay invested $590 in an account paying an interest rate of 4=% compounded continuously. Scarlett invested $590 in an account paying an interest rate of 43% compounded quarterly. After 5 years, how much more money would Scarlett have in her account than Ajay, to the nearest dollar?

2 Answers

1 vote

Answer:13

Explanation:

User Mincong
by
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6 votes

Answer:

about $10

Explanation:

You want the difference in interest earned after 5 years between an account earning 4.3% compounded quarterly and one earning 4% compounded continuously when the investment in each is $590.

Interest formulas

The account balance when interest is compounded quarterly for t years is ...

A = P(1 +r/4)^(4t) . . . . . P is the principal invested at annual rate r

The account balance with interest is compounded continuously for t years is ...

A = Pe^(rt)

Application

The attached calculator screen shows the account balances for an investment of $590 for 5 years in accounts earning 4.3% compounded quarterly and 4% compounded continuously.

Scarlett's account, compounded quarterly, earns about $10 more interest over 5 years than does Ajay's account compounded continuously.

Ajay invested $590 in an account paying an interest rate of 4=% compounded continuously-example-1
User UrsinusTheStrong
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