you have 1000 on a deposit....

Question

you have 1000 on a deposit at your bank at an annual rate of 1.2%. how much interest do you recieve after one year in the bank compounds a. continuously? b. daily, using 365 days in a year?

Answer 1

a)

 

Use the formula:

 

A = Pe^rt

 

where:

P = 1000

r = 0.012

t = 1

 

 

b)

 

Use the formula:

 

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

 

where:

P = 1000

r = 0.012

n = 365

t = 1

 

Note that n is the number of times compounded per year.

 

 

Now solve for A in each case.

Answer 2

a)

A = P * e^(r*t)

where,
P is the principle, here 1000
r is the rate, here 0.012
t is the time in years, here 1

b)

A = P * (1 + (r/n))^(n*t)

where:
P is principle, 1000
r is rate,  0.012
n is compound frequency, 365
t is time, 1

Solve for A and subtract P to obtain the interest earned in each part.

 

Subtraction is needed since you are only looking for the interest.  A is the new balance.