Question

You have $380,000

inyour bank account. The interest rate in your account is5%. Solve
for the following:
a. How muchinterest
will you accumulate if interest is compounded annually over the
next five years?

Answer 1

If the capitalization method is continuous, the interest obtained will be $104986.99

Explanation:

Cn = Co * (1 + i)^n

Co = 380,000

i = 0.05

n = 5

So:

Cn =380,000 * (1+.05/1)^(1*5)

Cn = 380,000 * (1+.05)^5

Cn = 380,000 * (105)^5

Cn = 380,000 * (1.2763)

Cn = 484,986.99

Cn - Co = interest acumulated:

484,986.99-380,000 = $104986.99