Answer:
<em>The difference between </em><em><u>simple</u></em><em> interest and compound interest is that the amount of compound interest earned gets (bigger or smaller) </em><em><u>bigger</u></em><em> every year.</em>
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<em>What</em><em> </em><em>is </em><em>simple</em><em> </em><em>interest?</em>
<em>Simple interest. Money paid only on principal, or money borrowed or invested.</em>
<em>What</em><em> </em><em>is </em><em>compound </em><em>interest?</em>
<em>T</em><em>he </em><em>interest </em><em>which </em><em>is </em><em>a</em><em>dded </em><em>to </em><em>the </em><em>initial </em><em>investment</em><em>,</em><em> </em><em>so that this will gain interest in subsequent time periods.</em>
Answer:
$3,129,414.40
Explanation:
i = 18% compounded monthly = 18% / 12 = 1.5% = 0.015
n = 2 yrs = 2 * 12 = 24 months
Growth(g) = 1% = 0.01
Present value of geometric series = A * [1 - (1+g)^n / (1+i)^n] / (I - g)
Present value of geometric series = $140000 * [1 - (1+0.01)^24 / (1+0.015)^24] / (0.015 - 0.01)
Present value of geometric series = $140000 * 1 - 0.8882352 / 0.005
Present value of geometric series = $140000 * 0.1117648 / 0.005
Present value of geometric series = $140000 * 22.35296
Present value of geometric series = $3,129,414.40
Thus, the present worth of the savings at an interest rate of 18% per year, compounded monthly is $3,129,414.40
