$6000 deposit at an apr of 3% with daily compunding for 9 years

Question

Use the compound interest formula for compounding ??? Ore than once a year to determine the accumulated balance after the stated period

Answer 1

Ashley:

 

Your question says clearly DAILY COMPOUNDING.  You can NOT use the once a year compounding formula, Ashley.

 

The apr is 3%.  Assuming there are 365 days in a year (no leap years) the daily rate is 0.3/365.  The number of days in 9 years is 9x365 is 3285.

 

Apply the formula A = P ( 1 + r / n ) ^nt, where t = number of years the money is borrowed for, t = 9. A = value after t periods, P = principal amount, P = 6000, r = annual nominal interest rate, r = 0.03, n = number of times the interest is compounded per year, n = 365.

 

I get A = 7859.05, Compound interest earned = 1859.05.

 

Dr. G.

Answer 2

daily interest rate =3/365% = 0.008219%

 

Number of compoundings = 9 x 365 = 3285

 

Accumulated balance = 6000(1 + 0.008219/100)³²⁸⁵ = 6000 (1.309942254) = $7859.65