Help with this word problem

[shaylee112]

You have $380,000 in your bank account. The interest rate in your account is 5%. Solve for the following:

a. How much interest will you accumulate if interest is compounded annually over the next five years?

b. How much interest will you earn in your account over the next five years with continuous compounding? You can use a scientific calculator or the =Exp() function in Microsoft Excel. If you are crafty you can also find web pages that will do the calculations for you. Regardless, show your steps and your work.

 

[cvandoren]

is the intrest increase every month, every 3 months??

 

[Denis]

is the intrest increase every month, every 3 months??

"a. How much interest will you accumulate if interest is compounded annually over the next five years?"

Compounded ANNUALLY means once per year, cvandoren.

Hint: F = P(1 + i)^n; F = 380000(1.05)^5;
once you get that, there's still a step to go...

 

[shaylee112]

B?

so is b this?



380000e^(0.05*5)
= 380000e^.25
= 380000*1.2840
= 487929.66 , total at end
487929.66 – 380000 = $107929.66, interest earned

 

[shaylee112]

A?

Is this a????




380000(1+.05/1)^(1*5)
= 380000(1+.05)^5
= 380000(105)^5
= 380000(1.2763)
= 484986.99, total money at end

 

[tkhunny]

Re: A?

Is this a????

Your arithmetic is good, but you haven't answered the question. Refer to your Part B answer for a clue.

Good work.