College Algebra (10th Edition)

Published by Pearson
ISBN 10: 0321979478
ISBN 13: 978-0-32197-947-6

Chapter 6 - Section 6.7 - Financial Models - 6.7 Assess Your Understanding - Page 475: 50

Answer

${{\$}} 1021.60$

Work Step by Step

The amount A after t years due to a principal P invested at an annual interest rate r, expressed as a decimal, compounded n times per year is $A=P\displaystyle \cdot(1+\frac{r}{n})^{nt}$ If compounding is continuous, $A=Pe^{rt}$ --- t = 3 months = $0.25$ years, $r=0.068$ On April 1, Kim will have (continuous compunding): $A=1000e^{(0.068)(0.25)}={{\$}} 1017.15$ Now, $P=1017.15$, the compounding is $n=12$ times per year, $r=0.0525,$ $t=$ 1 month = $\displaystyle \frac{1}{12}$ years. The amount on May 1: $A=1017.15\displaystyle \left(1+\frac{0.0525}{12}\right)^{(12)(1/12)}={{\$}} 1021.60$
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