| Chapter 4 Q10 | |||||
| A bank is loaning $5,000 for 3 years at an interest rate of 7.5 percent. | |||||
| How much additional interest can the bank earn if it compounds interest continuously rather than annually? | |||||
| PV | 5000 | ||||
| n | 3 | ||||
| i | 0.075 | ||||
| Continuous Compounding | FV = P * e^(rt) | ||||
| Annual Interest | $6,211.48 | =FV(D7,D6,,-D5) | |||
| Continuous | $6,261.61 | =D5*EXP(D7*D6) | |||
| Difference | $50.13 | =E11-E10 | |||
Monday, December 24, 2018
Continuous Compounding - How much additional interest can the bank earn if it compounds interest continuously rather than annually?
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment