College Algebra 7th Edition

Published by Brooks Cole
ISBN 10: 1305115546
ISBN 13: 978-1-30511-554-5

Chapter 4, Exponential and Logarithmic Functions - Section 4.2 - The Natural Exponential Function - 4.2 Exercises - Page 379: 38

Answer

$(a).$ semi-annually compounded $r=5.125\%$ provides the best Investment

Work Step by Step

The formula for continuously compounded Interest is, $A(t)=Pe^{rt}$ whereas, $P=Initial-Investment$, $r=rate$, $e=natural-logarithm's-constant-base$ and $t=time$. And formula for periodically(annualy,semi-annualy,quarterly,monthly,daily and so on) compounded Interest is, $A(t)=P\left(1+\frac{r}{n} \right)^{nt}$ whereas, $P=Intial-Investment,$ $rate,$ $n=number-of-times-it-compounds,$ and $time$. (a) is for compounded semi-annualy, (b) is for compounded continuously. Thus, The Table is as follows: $\begin{array}{ll} (a).r=5.125\% & (b).r=5\% & \\ P(1+\frac{r}{n})^{nt} & Pe^{rt} \\ P(1+\frac{0.05125}{2})^{2t} & Pe^{0.05t} \\ P(1.05191)^t & P(1.05127)^t \end{array}$ $P(1.05191)^t\gt P(1.05127)^t$. Therefore, $(a).r=5.125\%$ provides the best Investment
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