Download - Sulpcegu5e ppt 5_7
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Section 5.7
Financial Models
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OBJECTIVE 1
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A credit union pays interest of 4% per annum compounded quarterly on a certain savings plan. If $2000 is deposited in such a plan and the interest is left to accumulate, how much is in the account after 1 year?
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Find the amount A that results from investing a principal P of $2000 at an annual rate r of 8% compounded continuously for a time t of 1 year.
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OBJECTIVE 2
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Suppose you want to open a money market account. You visit three banks to determine their money market rates. Bank A offers you 5% compounded monthly and Bank B offers you 5.04% compounded quarterly. Bank C offers 4.9% compounded continuously. Determine which bank is offering the best deal.
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OBJECTIVE 3
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(a)7% compounded monthly?
(b) 6% compounded continuously?
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OBJECTIVE 4
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What annual rate of interest compounded quarterly should you seek if you want to double your investment in 6 years?
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(a) How long will it take for an investment to double in value if it earns 6% compounded continuously?
(b) How long will it take to triple at this rate?