Question

Tom and Jerry make separate investments at the same time. Tom invests $2000 at an annual interest rate of 2% compounded continuously. Jerry invests $1800 at an annual rate of 2.5% compounded monthly.

a.) Who has the most money after 15 years? Clearly show all work to support your answer.
b.) How long will it take for Tom’s investment to triple in value?

Answer 1

Explanation:

TOM / 6.02 years

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Tom: 2000(1.02)^15 = $2,691.74

Jerry: 1800(1.025)^15 = $2,606.94

TOM has more money after 15 years...

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6000 = 2000(1.02)^t

3=(1.02)^t

ln(3) = t * ln(1.02)

t = ln(3)/ln(1.2)

t = 6.02 years