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repeat problem 2.32 for continuous compounding at 8.5%. how significant is the 0.5% difference vis-a-vis problem 5.21?

User Cfreak
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1 Answer

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Final answer:

To calculate continuous compounding, use the formula A=P*e^rt with an 8.5% interest rate. The significance of the 0.5% difference depends on the specific context and values involved in the problems, and without more details, it's challenging to determine its impact precisely.

Step-by-step explanation:

In this question, we need to calculate the accumulation for continuous compounding at 8.5%. To do this, we can use the formula for continuous compounding:

A = P*e^(rt), where A represents the accumulation, P is the principal amount, r is the interest rate, and t is the time period. Let's assume the principal amount is $1000 and the time period is 1 year:

Calculate the accumulation using the formula A = P*e^(rt).

Compare this result to the accumulation calculated in Problem 5.21, where the interest rate was 8%.

Determine the significance of the 0.5% difference between the two accumulations to understand the impact.

User Selethen
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