Homework SourseSuppose that Nora invested 400 at 825 compounded annually fo
Suppose that Nora invested $400 at 8.25% compounded annually for 5 years and Patti invested $400 at 8% compounded quarterly for 5 years. At the end of 5 years, who will have the most money and by how much? (Round your answer to the nearest cent.)
Suppose that Nora invested $400 at 8.25% compounded annually for 5 years and Patti invested $400 at 8% compounded quarterly for 5 years. At the end of 5 years, who will have the most money and by how much? (Round your answer to the nearest cent.)
Solution
Nora\' s Compound interest formula for compounding annually :
A = P(1 +r)^n
= 400( 1+ 0.0825)^5
= $ 594.56
Patti\'s Compound interest formula for quarterly compounding :
A = P( 1+r/4)^4n
= 400( 1+0.08/4)^5*4
= $594.38
so, Nora earns more by 18 cents
