0

# Trish invests \$5,000 in her IRA in a bond trust that pays 9%....

Trish invests \$5,000 in her IRA in a bond trust that pays 9% interest compounded quarterly. Sean invests \$5,000 in his IRA  in a certificate of deposit that pays 8.9% compound continuously. who has more money after 20 years, Trish or Sean? After 20 years Trish will have ?  After 20years, Sean will have? Who will have more money after 20years? Trish or Sean?

### 2 Answers by Expert Tutors

Isaac K. | Reliable and Knowledgeable in Math, Science, and Test Prep SkillsReliable and Knowledgeable in Math, Scie...
4.9 4.9 (132 lesson ratings) (132)
0
compounded investment
A = a(1+r/n)nt

A: a return
a: invested money
r: annual interest
n: compounding frequency per year
t: number of year

when n →∞, then

A = a*exp(rt)

(1) Sean
Quarterly compounded (9% annual interest): A = 5000*(1+0.09/4)4*20
= 29,651
(2) Trish
continuously compounded (8.9% annual interest): A= 5000*exp(0.089*20)
= 29,649

Practically, they will have the same money in 20 yrs.