Question

Starting with $5,000, you invest in an account that pays 2% APR, compounded quarterly, and plan to leave the money there and not touch it for at least 12 years. How much MORE money would you have after 12 years if the interest had been compounded continuously instead? Round to the nearest cent.

Answer 1

$1,352.5

Explanation:

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

Where,

P=principal

r=interest rate

n=no of periods

t=time

P=$5,000

r=2%

n=4

t=12

A=5000(1+0.02/4)^4*12

=5000(1+0.005)^48

=5000(1.005)^48

=5000(1.2705)

=$6,352.5

How much more money after 12 years

=$6,352.5-$5000

=$1,352.5