Find a formula for the inverse of the following functions fx
Solution
solution:
problem 9
The formula for annual compound interest is A = P (1 + r/n) ^ nt:
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is invested or borrowed for
now
a) for after t years balane will be
B=500(1+0.08/1)t
=500(1.08)t
b) for monthly interest rate n=12 hence
B=500(1+(0.08/12))12t
B=500(1.0066)12t
c) For continously compounded rate the formula for amount is
A=Pert
where r= rate in decimal
t=time in years
hence
B=500e0.08t
d) effective annual rate at bank M
= 0.08/12=0.0066per month
e) we have found formula
A=Pert
550=500e0.08t
0.08t=ln(550/500)
0.08t=0.095
t=1.191 years

