Unformatted text preview: o that he’ll have $4000 at the end of two years? A = P(1 + r/n)nt
let m = n/r, then A = P(1 + 1/m)mrt = P[(1 + 1/m)m]rt
look familiar? As n, the number of times per year that interest is compounded, increases without bound
m increases without bound.
as m increases without bound
(1 + 1/m)m approaches e Compound interest formula (compounded continuously) A = Pe rt 4)
Ex: A total of $12,000 is invested at an annual percentage rate of 9%.
Find the balance after 5 years if the interest is compounded continuously. 5) A sum of $9000 is invested at an annual percentage rate of 8.5%.
Find the balance in the account after 3 years if
a) interest is compounded annually
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- Fall '11
- Annual Percentage Rate, William