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# bank compounds

Depostiting 3,000 for 6 years and 7 percent interest, what would be the return to the nearest cent?

What would be the return if the bank compounds monthly?

If compounds are continuous then formul used is A=pe(small n) where e is a constant and equals approximately 2.7183. Calculate A with continuious compounding. Round numbers to the nearest cent.

### 1 Answer by Expert Tutors

Ryan S. | Mathematics and StatisticsMathematics and Statistics
4.8 4.8 (10 lesson ratings) (10)
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Your question is using the term "return" in an unusual way. Usually return refers to rate of return which in this case is the interest rate. For this problem, I will interpret return as the dollars earned as interest.
Also the formula you have for continuous compounding is not correct. A=P*e^(i*t) where A = Account value, P = initial balance, i = interest per year, and t = time in years. The symbol ^ means raised to the power of.

Let A(t) be the account value at time t in years.
Let r(t) = A(t)-3000

Annual compounding

A(6) = \$3000*1.07^6=\$4502.19
r(t) = \$1502.19

Monthly compounding

A(6) = \$3000*(1+.07/12)^(6*12) = \$4560.32
r(t) = \$1560.32

Continuous compounding

A(6) = \$3000*e^(.07*6) =\$4565.88
r(t) = \$1565.88