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January 27, 2015

January 27, 2015

Posted by **Cecilia** on Sunday, March 9, 2008 at 3:46pm.

1. The account pays 2.5% annual interest compounded monthly.

2. The account pays 1.75% annual interest compounded yearly.

3. The account pays 4% annual interest compounded yearly.

For the first one, I think that I'm supposed to solve the equation this way: $1600 (1+.025/12 which is 1.0028)^36, since it's three years. I tried doing this same formula for the other two, except changing monthly to quarterly and yearly, but it doesn't work out. The other two are smaller numbers than the first, which doesn't make sense because it should increase. Can someone please help me?

- math -
**drwls**, Sunday, March 9, 2008 at 4:09pmYour first number should have been

1600*(1.00208333)^36 = $1724.48

You left out a 0 after the 2 in the 1.0020833, and you should not have rounded off to five significant figures. You need a total of at least six significant figures to keep track of the principal accurately.

Your third number should be

1600(1.04)^3 = $1799.78, which is not less than the first.

The second case of course returns less because of the very low 1.75% interest rate.

- math -
**Cecilia**, Sunday, March 9, 2008 at 4:10pmThank you.

- math -

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