Answer:
Explanation:
A) We would apply the formula for determining compound interest which is expressed as
A = P(1+r/n)^nt
Where
A = total amount in the account at the end of t years
r represents the interest rate.
n represents the periodic interval at which it was compounded.
P represents the principal or initial amount deposited
From the information given,
P = $75000
r = 12.5% = 12.5/100 = 0.125
n = 1 because it was compounded once in a year.
t = 30 years
Therefore,
A = 75000(1 + 0.125/1)^1 × 30
A = 75000(1.125)^30
A = $2568248
The formula for continuously compounded interest is
A = P x e(r x t)
Substituting the above information, it becomes
A = 75000 x e^(0.125 x 30)
A = 75000 x e^(3.75)
A = $3189081