Question

(1 point) When one rents an apartment, one is often required to give the landlord a security deposit that is returned if the apartment is undamaged when you leave. In some localities, the landlord is required to pay the tenant interest once a year compounded yearly. Assume that the landlord is required to pay the tenant interest of 5 % compounded annually. (a) Suppose the landlord invests a security deposit of $ 550 at a rate of 4.3 % compounded continuously. What is his net gain or loss after one year, rounded to the nearest cent

Answer 1

Answer:

Amount of Loss = $3.85

Explanation:

Data Given:

Tenant Interest = 5% compounded Annually

Investment = $550

Rate of Interest = 4.3%

Amount by compound interest after "n" years can be calculated by using the following formula:

A = P$(1 + \frac{R}{100}) ^{n}$

P = Principal Amount

R = rate of interest

n = Time period

Amount to be paid to tenant after one year:

A1 = 550 $(1 + \frac{5}{100}) ^{1}$

A1 = $577.5

a) Amount after investing at 4.3% for one year

A2 = 550 $(1 + \frac{4.3}{100}) ^{1}$

A2 = $573.65

As we can see, A1 is greater than A2 so, there is a clear loss.

Amount of Loss = A1-A2

Amount of Loss = $577.5 - $573.65

Amount of Loss = $3.85