Case Study - Continuous Compounding

Assignment Help Mathematics

Reference no: EM133029961

Assignment Project - Finite Math

Case Study - Continuous Compounding

Read the information on continuously compounded interest. Answer these questions -

Q1. Find the compound amount when $20,000 is invested at 6% compounded continuously for

(a) 2 years; (b) 10 years; (c) 20 years.

Q2. (a) Find the compound amount when $2500 is invested at 5.5%, compounded monthly for two years.

(b) Do part (a) when the interest rate is 5.5% compounded continuously.

Q3. Determine the compounded amount from a deposit of $25,000 when it is invested at 5% for 10 years and compounded in the following time periods:

(a) annually (b) quarterly (c) monthly (d) daily (e) continuously

Q4. Determine the compounded amount from a deposit of $250,000 when it is invested at 5% for 10 years and compounded in the following time periods:

(a) annually (b) quarterly (c) monthly (d) daily (e) continuously

Q5. Suppose you win a court case and the defendant up to 8 years to pat you $5000 in damages. Assume that the defendant will wait until the last possible minute to pay you.

(a) If you can get an interest rate of 3.75% compounded continuously, what is the present value of the $5000?

(b) If the defendant offers you $4000 immediately to settle his debt, should you take the deal?

Q6. Determine the best interest rate for a new car purchase for a 48-month loan at a bank near you. If you finance $25,999 with such a loan, determine the payment and the total interest paid over the course for the loan. Also, determine the best interest rate for a new car purchase for a 48-month loan at a credit union near you. Determine the monthly payment and total interest paid if the same auto loan is financed through the credit union. Is it true that the credit union would save you money?

Attachment:- Case Study – Continuous Compounding.rar

Reference no: EM133029961

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