Question

Connor invested $8,000 in an account paying an interest rate of 82% compounded

monthly. Henry invested $8,000 in an account paying an interest rate of 8 %
compounded daily. After 5 years, how much more money would Henry have in his
account than Connor, to the nearest dollar?

Answer 1

Connor would have $83.37 more than Henry.

Explanation:

Connor:

Initial investment= $8,000

Interest rate= 8.2% = 0.082/12= 0.00683

Number of periods= 12*5= 60 months

Henry:

Initial investment= $8,000

Interest rate= 8% = 0.08/365= 0.00022

Number of periods= 365*5= 1,825 days

To calculate the future value, we need to use the following formula on each investment:

FV= PV*(1+i)^n

Connor:

FV= 8,000*(1.00683^60)

FV= $12,035.35

Henry:

FV= 8,000*(1.00022^1,825)

FV= $11,951.98

Difference= 12,035.35 - 11,951.98= $83.37

Connor would have $83.37 more than Henry.