Final answer:
To calculate the difference in earnings, we need to calculate the amount obtained in each scenario and find the difference between them. Daily compounding at 1.33% results in earning approximately $344.69 more than semi-annual compounding at 1.33% over a period of 3 years.
Step-by-step explanation:
To calculate the difference in earnings, we need to calculate the amount obtained in each scenario and find the difference between them.
For the first scenario of daily compounding at 1.33%, we can use the formula: A = P(1 + r/n)^(nt), where:
- A is the future value
- P is the principal amount (initial investment)
- r is the annual interest rate (as a decimal)
- n is the number of times that interest is compounded per year
- t is the number of years
For the second scenario of semi-annual compounding at 1.33%, we calculate A in the same way, but with a different value of n.
After calculating the future values in each scenario, we can find the difference in earnings by subtracting the amount obtained with semi-annual compounding from the amount obtained with daily compounding.
Using this method, we find that daily compounding at 1.33% results in earning approximately $344.69 more than semi-annual compounding at 1.33% over a period of 3 years.