Question

Sophie invested $92,000 in an account paying an interest rate of 6 1/8% compounded

continuously. Damian invested $92,000 in an account paying an interest rate of 6 5/8%

compounded monthly. After 14 years, how much more money would Damian have in

his account than Sophie, to the nearest dollar?

Answer 1

Explanation:

To solve this problem, we need to use the formula for compound interest:

A = P*e^(rt)

where A is the final amount, P is the principal (initial investment), e is the base of the natural logarithm (approximately 2.71828), r is the interest rate (expressed as a decimal), and t is the time (in years).

For Sophie's account, we have:

P = $92,000

r = 6 1/8% = 0.06125 (as a decimal)

t = 14 years

A = 92000*e^(0.06125*14)

A = $219,499.70 (rounded to the nearest cent)

For Damian's account, we have:

P = $92,000

r = 6 5/8% = 0.06625/12 = 0.005521 (as a monthly decimal rate)

t = 14*12 = 168 months

A = 92000*(1+0.005521)^168

A = $288,947.46 (rounded to the nearest cent)

Now we can subtract Sophie's final amount from Damian's final amount to find the difference:

Difference = $288,947.46 - $219,499.70

Difference = $69,447.76

Therefore, Damian would have about $69,448 more in his account than Sophie, to the nearest dollar.