Problema Solution

Find the future value and interest earned if $56,780 is invested at 2.3% compound a.)quarterly for 23 quarter b.)continuously for 15 yrs.

Answer provided by our tutors

P = $56,780 the principal or present value

r = 0.023 or 2.3% annual interest rate


a)


m = 4 compounding periods per year (since the compounding is made quarterly)

i = r/m = 0.023/4 interest rate per period

n = 23 quarters (total number of compounding periods)

A = the future value


A = P(1 + i)^n


A = 56780(1 + 0.023/4)^23


A = $64,783.79


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b)


A = the future value

e = 2.71828183


A = P*e^(rt)


A = 56780*2.71828183^(0.023*15)


A = $80,172.79


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