Question

Melanie invested $3800 in an account paying in interest rate of 2 3/8% compounded quarterly Sebastian invested $3800 in an account paying in interest rate of 2 3/4% compounded monthly after 16 years how much more money with Sebastian have in his account then Melanie to the nearest dollar

Answer 1

$317

Explanation:

Formula for compound interest is;

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

For melanie;

P = $3800

r = 2⅜% = 0.02375

n = 12/4 = 3

t = 16 years

Thus;

A = 3800(1 + (0.02375/3))^(3 × 16))

A ≈ $5548

For Sébastien;

P = $3800

r = 2¾% = 0.0275

n = 12

t = 16

Thus;

A = 3800(1 + (0.0275/12))^(12 × 16))

A ≈ 5865

Difference between Sébastien and Melanie's final amount = $5865 - $5548 = $317