Homework SourseWhich is the better deal 10000 invested at 5 compounded year
Which is the better deal, $10,000 invested at 5%, compounded yearly, for 20 years, or $5,000 invested at 10%, compounded continuously, for 20 years?
Which is the better deal, $10,000 invested at 5%, compounded yearly, for 20 years, or $5,000 invested at 10%, compounded continuously, for 20 years?
Solution
$10,000 invested at 5%, compounded yearly, for 20 years,
---- Amount = Principal( 1 + rate)^year
= 10000(1 +0.05)^20
= 10,000(1.05)^20
= $ 26532.98
$5,000 invested at 10%, compounded continuously, for 20 years?
--- Amount = Principal[e^(rate*time)]
= 5000[e^(0.1*20)]
= $ 36945
2nd deal is better
