Hi all,
The question I'm working on is: Suppose a principal of $1000 is deposited into an account that pays annualinterest r compounded quarterly.
(a) Give the formula for the future value of the balance after 12 years.
(b) Approximate using differentials the absolute error in the future value ofthe balance after 12 years if you know the interest rate is 5% with anabsolute error of 0.1%.
For (a), I get A=1000(1+r/4)^48
and I differentiated and got 12,000(1+r/4)^47
Plugging 5% or 0.05 into r,
A=12,000(1.0125)^47
=21,515.31678
After getting here i'm kinda of stuck. How do I get the absolute error?
Do i just multiply my answer (21,515.31678) by 0.001?
Thanks
The question I'm working on is: Suppose a principal of $1000 is deposited into an account that pays annualinterest r compounded quarterly.
(a) Give the formula for the future value of the balance after 12 years.
(b) Approximate using differentials the absolute error in the future value ofthe balance after 12 years if you know the interest rate is 5% with anabsolute error of 0.1%.
For (a), I get A=1000(1+r/4)^48
and I differentiated and got 12,000(1+r/4)^47
Plugging 5% or 0.05 into r,
A=12,000(1.0125)^47
=21,515.31678
After getting here i'm kinda of stuck. How do I get the absolute error?
Do i just multiply my answer (21,515.31678) by 0.001?
Thanks