Annual Interest Rate

Question

An investment of $8,000 is made on April 19, 2012. Find the value of this investment at the end of April 19, 2017 in each of the following situations. Give your answers accurate to two decimal places. Show all of your work.

 

a.) At an annual interest rate of 3% compounded monthly.

 

b.) At an annual interest rate of 3% compounded daily.

 

c.) At an annual interest rate of 3% compounded continuously. 

Answer 1

a) = 8000(1+0.03/12)¹² i.e. 8,000(1.0025¹²

 

b) similar to above, but replace 12 by 365 (in two places)

 

c) = 8000e^0.03