Precalculus (6th Edition) Blitzer

Published by Pearson
ISBN 10: 0-13446-914-3
ISBN 13: 978-0-13446-914-0

Chapter 3 - Review Exercises - Page 512: 11

Answer

Monthly compounding at $ 7\%$ yields the greater return.

Work Step by Step

After t years, the balance, A, in an account with principal P and annual interest rate r (in decimal form), if compounded n times per year, is: $\displaystyle \quad A=P(1+\frac{r}{n})^{nt}$ if compounded continuously, it is: $\quad A=Pe^{rt}$ --- Monthly compounding (n=12) at $ 7\%$: $\quad $ $ A=14,000(1+\displaystyle \frac{0.07}{12})^{12(10)}=28,135.26$ Continuous, at $ 6.85\%$ $ A=14,000e^{0.0685(10)}=27,772.81$ Monthly compounding at $ 7\%$ yields the greater return.
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