Question

The equation for calculating compound interest is: A=P(1 +..)There are two options for investing $500The first eams 7% interest, compounded annually.The second ears 79 interest, compounded quarterlyUse the information provided to answer the questions belowa Write equations for each of the two scenarios:

Answer 1

Given The equation for calculating compound interest

`A=P(1+(r)/(n))^(nt)`

There are two options for investing $500 ⇒ P = 500

The first earns 7% interest, compounded annually

so, r = 7% = 0.07, and n = 1

So, the equation will be:

`\begin{gathered} A=500(1+0.07)^t \\ A=500(1.07)^t \end{gathered}`

The second ears 7% interest, compounded quarterly

So, r = 7% = 0.07, and n = 4

So, the equation will be:

`\begin{gathered} A=500(1+(0.07)/(4))^(4t) \\ A=500(1.0175)^(4t) \end{gathered}`

So, the answer will be the equations are:

`\begin{gathered} Annually\colon A=500(1.07)^t \\ Quarterly\colon A=500(1.0175)^(4t) \end{gathered}`