Answer:
$139
Explanation:
The formula for compound interest =
A = P(1 + r/n)^nt
Where
P = Principal
r = Interest rate
n = Compounding frequency
t = time in years
A = Amount after t years
For Melanie
Melanie invested $8,600 in an account paying an interest rate of 2 7/8% compounded monthly.
Rate = 2 7/8% = 23/8% = 2.875%
Time = 10 years
n = monthly = 12
First, convert R percent to r a decimal
r = R/100
r = 2.875%/100
r = 0.02875 per year,
Then, solve our equation for A
A = P(1 + r/n)^nt
A = 8,600.00(1 + 0.02875/12)^(12)(10
A = 8,600.00(1 + 0.002395833)^(120)
A = $11,460.64
For Oliver
Oliver invested $8,600 in an account paying an interest rate of 2 3/4 % compounded daily.
Rate = 2 3/4% = 11/4% = 2.75%
Time = 10 years
n = daily = 360 days
First, convert R percent to r a decimal
r = R/100
r = 1.375%/100
r = 0.01375 per year,
Then, solve our equation for A
First, convert R percent to r a decimal
r = R/100
r = 2.75%/100
r = 0.0275 per year,
Then, solve our equation for A
A = P(1 + r/n)^nt
A = 8,600.00(1 + 0.0275/360)^(360)(10)
A = 8,600.00(1 + 7.6389E-5)^(3600)
A = $11,322.05
After 10 years, how much more money would Melanie have in her account than Oliver, to the nearest dollar?
This is calculated as
$11,460.64 - $11,322.05
=$ 138.59
Approximately to the nearest dollar = $139