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Section 4.7
Compound Interest
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OBJECTIVE 1
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A credit union pays interest of 4% per annum compounded quarterly on a certain savings plan. If $2000 is deposited in such a plan and the interest is left to accumulate, how much is in the account after 1 year?
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Find the amount A that results from investing a principal P of $2000 at an annual rate r of 8% compounded continuously for a time t of 1 year.
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OBJECTIVE 2
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The effective rate of interest is the equivalent annual simple rate of interest that would yield the same amount as compounding after 1 year.
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OBJECTIVE 3
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(a)7% compounded monthly?
(b) 6% compounded continuously?
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What annual rate of interest compounded quarterly should you seek if you want to double your investment in 6 years?
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OBJECTIVE 4
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(a)How long will it take for an investment to double in value if it earns 6% compounded continuously?
(b) How long will it take to triple at this rate?