Question

Stan borrows $5,500 at a rate of 12% interest per year. What is the amount due at the end of 5 years if the interest is compounded continuously? In your final answer, include your calculations.

Answer 1

1.) Without compound interest, you would earn only $8800.00. This means that thanks to the power of compound interest you will earn an additional $1191.83 in interest at the end of the 5 year term.

2.) Using the compounded interest formula, you will earn $22883.01 after the 7 year term.

3.) Because of the negative interest, the compounded amount is only $695,929.30.

4.) Putting money in a saving account is saving money with a lower earning compared to investments. Investments have the higher potential of earning more than just having a basic savings account.

Explanation:

Answer 2

If you don't have compound interest, you would earn only $8800.00. This means that thanks to the power of compound interest you will earn an additional $1191.83 in interest at the end of the 5 year plan.