Problema Solution
Leslie Mosallam, who recently sold her Porsche placed $10,000 in a savings account paying annual compound interest of 6 percent. Suppose leslie moves her money into an account that pays 8 percent for 1 year, what is the amount of money that will accumulate? What is the amount that will accumulate when paid at 10 percent for 1 year?
Answer provided by our tutors
P = $10,000 the principal
t = 1 year the time in years
r = 0.08 or 8% annual rate
m = 1 compounding periods per year
i = r/m = 0.08 or 8% interest rate per period
n = t*m = 1 total number of compounding periods
A = P(1 + i)^n
A = 10000(1 + 0.08)^1
A = 10000*1.08
A = $10,800
the account that pays 8 percent for 1 year will accumulate $10,800.
for r = 0.10 or 10% we have
A = 10000(1 + 0.10)^1
A = 10000*1.10
A = $11,000
the account that pays 10 percent for 1 year will accumulate $11,000.