Question

Max has $2000: $1000 decreased in value exponentially at a rate of 0.5% annually

$1000 earned 1.8% annual interest compounded biannually (twice a year)

What is the balance of Max’s $2000 after 10 years?

Answer 1

$2147.36

Explanation:

The first value can be modeled by ...

b1 = 1000·(1 -0.005)^t

After 10 years, that balance is ...

b1 = 1000·0.995^10 = 951.11

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The second value can be modeled by ...

b2 = 1000·(1 +0.018/2)^(2t)

After 10 years, that balance is ...

b2 = 1000·1.009^20 = 1196.25

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The total of the two investments after 10 years is ...

$951.11 +1196.25 = $2147.36