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MAT 101 Module 5 SLP

# MAT 101 Module 5 SLP - with a 2 interest rate that this is...

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TUI UNIVERSITY Christopher Clark MAT 101 College Mathematics Module 5 Session Long Project Dr. Gennadiy Kuleshov March 21, 2011 Take the current amount you have in your checking or savings account. Suppose you have a choice of keeping your money for five years in a savings account with a 2% interest rate, or in a five year certificate of deposit with and interest rate of 4.5%. Calculate how much interest you would earn with each option over five years time with continuous compounding. So, in my savings account I have \$26,000 in the account and if I were to have a 2% interest rate I would figure the amount of my interst using the formula A=Pe rt \$26,000*e 0.045*5 =\$135, 983.622 total To get the interest \$135,983.622-\$26,000= \$109 983.622 interest Wow, now that is some serious cash to earn over a 5 year period with the interest rate of 4.5%. Seems already without doing the calculations for the savings account

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Unformatted text preview: with a 2% interest rate that this is a better idea. The only concern I know with CD accounsts is that you may be penalized if you draw you money out before the term is up. But with a savings account normally there is no penalty for drawing out any money at anytime. So here is the calculation for the account with the 2% interest rate \$26,000*e 0.02*5 = \$132,626.174 total To get the interest \$132,626.174-\$26,000=\$106,626.174 Difference from 4.5% and 2% over a five year period \$109,983.622-\$106,626.174=\$3,357.448 So overall it is a better decision to go with the CD account and earn more money on your money. I would definitely go with the CD account because I am about my money. If I can make more money on my money then we have a good day at hand....
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MAT 101 Module 5 SLP - with a 2 interest rate that this is...

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