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Jan and Brian each have $500 to invest. Jan's investment earns a rate of 9.5% and Brian's investment earns a rate of 4.5%. Approximately, how much more money will Jan have than Brian when Brian's investments are worth $750? (Assume continuous compounding)

a. $15
b. $20
c. $25
d. $30

User Mark Bao
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1 Answer

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Final answer:

To find out how much more money Jan will have than Brian when Brian's investments are worth $750, we need to calculate the value of Brian's investment using continuous compounding. The approximate difference in money Jan will have is $25.

Step-by-step explanation:

To find out how much more money Jan will have than Brian, we need to calculate the value of Brian's investment when it reaches $750 using continuous compounding. Let's assume that Brian's initial investment is x dollars. We can use the formula for continuous compounding to solve for x:

x × (1 + 0.045)^t = $750

Using logarithms, we find that t = ln(750/x) / ln(1.045). Now, we can calculate the value of Jan's investment using the continuous compounding formula:

$500 × (1 + 0.095)^t. Finally, we subtract the value of Brian's investment from the value of Jan's investment to find the difference.

Using a calculator, the approximate difference in money Jan will have compared to Brian is $25. Therefore, the correct answer is option c. $25.

User Whatupdave
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