Math

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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 -

    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 -

    Okay where did the 6% came in from?

  • Math -

    The 6% is an example for the definition of the symbol R. Sorry if it misled you!

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