A bank advertises a savings account that earns 3% APR compounded daily.
What is the "n" become for the compound interest formula?
How many days in a year ???
365
To determine the value of "n" in the compound interest formula, we need more information. The compound interest formula is given as:
A = P(1 + r/n)^(nt)
Where:
A is the final amount
P is the principal amount (initial deposit)
r is the annual interest rate (expressed as a decimal)
n is the number of times interest is compounded per year
t is the number of years
In this case, we know the annual interest rate (3% or 0.03) and that interest is compounded daily. However, we are missing the value of "n," which corresponds to the number of times interest is compounded per year.
To find the value of "n," we need to convert the compound frequency from daily to a yearly basis. Given that there are 365 days in a year, we can substitute "n" with the number of times interest is compounded in a year. However, it is important to note that compounding daily could also mean considering weekends and leap years.
Assuming it is a standard year with 365 days and no adjustments for weekends or leap years, we can set "n" as 365.