Suppose that you invest $10,000 for 5 years.
* If the compound interest rate is doubled, does the amount accumulated also double at the end of 5 years? Defend your answer with an actual illustration
It will Not be doubled after 5 years.
Say you get an interest rate of 10%.
Then you would have (1.1 for 100% + 10%):
1 10,000 * 1.1 = 10,100
2 10,100 * 1.1 = 11,110
3 11,110 * 1.1 = 12,221
4 12,221 * 1.1 = 13,443.10
5. 13,443.10 * 1.1 = 14,787.41
So your interest is $14,784.41 - $10,000 = $4,787.41.
Now say you get an interest rate of 20%.
Then you would have (1.2 for 100% + 20%):
1 10,000 * 1.2 = 12,000
2 12,000 * 1.2 = 14,400
3 14,400 * 1.2 = 17,280
4 17,280 * 1.2 = 20,736
5. 20,736 * 1.2 = 24,883.20
So your interest is $24,883.20 - $10,000 = $14,883.20
That's almost three times as much interest as when the rate was 10%.
2006-12-19
12:49:10
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5 answers
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asked by
shellybear0925
3
in
Mathematics