Which investment yields the greater return over 6 years: 7.5% compounded continuously or 7.6% compounded semiannually?

Question

2) Suppose that you have $4000 to invest. Which investment yields the greater return over 6 years: 7.5% compounded continuously or 7.6% compounded semiannually?

A) Both investment plans yield the same return.

B) $4000 invested at 7.5% compounded continuously over 6 years yields the greater return.

C) $4000 invested at 7.6% compounded semiannually over 6 years yields the greater return.

Answer 1

Continuous A = Pe^(rt)

A = 4000e^(.075(6))

A = 6273.25

Semi Annual Compound A=P(1+r/2)^(2t)

A = 4000(1+.076/2)^12

A = 6257.89