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Unformatted text preview: 5.2 Compound Interest Math 121 Lecture 27 ! Compound Interest: NonContinuous ! Compound Interest: Continuous ! Applications of Interest Compounded Continuously Compound Interest: NonContinuous P = principal amount invested m = the number of times per year interest is compounded r = the interest rate t = the number of years interest is being compounded A = the compound amount, the balance after t years ! For example, suppose you invest $32,000 into a certificate of deposit that has an annual interest rate of 5.2% compounded quaterly for 3 years. Then compound amount is Notice that as m increases, so does A . Therefore, the maximum amount of interest can be acquired when m is being compounded all the time  continuously. Compound Interest: Continuous P = principal amount invested r = the interest rate t = the number of years interest is being compounded A = the compound amount, the balance after t years Consider the $32,000 from the earlier example. Now we will invest the money in an account that has 5.2% annual will invest the money in an account that has 5....
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 Spring '09
 Math, Calculus

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