Posted by **MIKE.** on Monday, April 25, 2011 at 4:37pm.

You deposit $10,000 at 5% per year. What is the balance at the end of

one year if the interest paid is

(a) simple interest

(b) compounded monthly

- Math -
**MathMate**, Monday, April 25, 2011 at 6:06pm
Let

A=amount at the end of n periods

r=interest rate per annum, 0.06 for 6% p.a.

R=interest rate per period, in the form

(1+r/k) where k=number of periods per year

(1+0.06)=1.06 for 6% p.a., or

(1+0.06/12)=1.005 for 6% p.a. compounded monthly

Simple interest:

A=PRn

=10000*1.05=10500

Compound interest:

A=PR^n

=10000*(1+0.05/12)^12

=10000*1.051162

=10511.62

Compound interest, compounded monthly

- Math -
**MIKE.**, Monday, April 25, 2011 at 7:25pm
Okay where did the 6% came in from?

- Math -
**MathMate**, Monday, April 25, 2011 at 7:44pm
The 6% is an example for the definition of the symbol R. Sorry if it misled you!

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