Question

David invested $340 in an account paying an interest rate of 2\tfrac{1}{8}2 8 1 ​ % compounded continuously. Natalie invested $340 in an account paying an interest rate of 2\tfrac{3}{4}2 4 3 ​ % compounded quarterly. After 17 years, how much more money would Natalie have in her account than David, to the nearest dollar?

Answer 1

Answer:

$53.83

Step-by-step explanation:

For David

David invested $340 in an account paying an interest rate of 2\tfrac{1}{8}2 8 1 ​ % compounded continuously.

r = 2 1/8% = 17/8% = 2.125% = 0.02125

t = 17 years

P = $340

For Compounded continuously, the formula =

A = Pe^rt

A = Amount Invested after time t

P = Principal

r = interest rate

t = time

A = $340 × e^0.02125 × 17

A = $ 487.94

For Natalie

Natalie invested $340 in an account paying an interest rate of 2\tfrac{3}{4}2 4 3 ​ % compounded quarterly.

r = 2 3/4 % = 11/4% = 2.75% = 0.0275

t = 17 years

P = $340

n = compounded quarterly = 4 times

Hence,

Compound Interest formula =

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

A = Amount Invested after time t

P = Principal

r = interest rate

n = compounding frequency

t = time

A = $340 (1 + 0.0275/4) ^17 × 4

A = $ 541.77

After 17 years, how much more money would Natalie have in her account than David, to the nearest dollar?

This is calculated as

$541.77 - $ 487.94

= $53.83

Hence, Natalie would have in her account, $53.83 than David