If 6000 dollars is invested at an interest rate of 8 percent per year, find the value of the investment at the end of 5 years for the following compounding methods, to the nearest cent.

Answer 1

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

A=6000(1+.08)^5 for annual compounding

A=6000(1+ .08/12)^12(5) for monthly compounding

A=6000(1+ .08/4)^4(5) for quarterly compounding

A=6000(1 +.08/365.25)^365.25(5) for daily compounding

A = 6000e^.08(5) for continous compounding

A = 6000e^.08(5)

A =6000e^.4

A = $8950.95 after 5 years at 8%

for annual compounding

6000 at time t=0

6000(1.08) = 6480 at t=1

6000(1.08)^2 = $699.84 after 2 years

6000(1.08)^3 = 7558.72 after 3

6000(1.08)^4 = 8162.93 after 4

6000(1.08)^5 =$8815.97 rounded off to nearest cent aftr 5 years

for daily and monthly to quarterly compounding

the investment grows to between

$8815.97 to $8950.95