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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
The current amount A of a principal P invested in a savings account paying an annual interest rate r is given by
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Â
where n is the number of times per year the interest is compounded. For continuous compounding, A = Pert. Suppose $10,000 is initially invested at 3.5 percent (r = 0.035).
Â
a. Plot A versus t for 0 ≤t≤ 20 years for four cases: continuous compounding, annual compounding (n = 1), quarterly compounding n = 4), and monthly compounding (n = 12). Show all four cases on the same subplot and label each curve. On a second subplot, plot the difference between the amount obtained from continuous compounding and the other three cases.
b. Redo part a but plot A versus t on log-log and semilog plots. Which plot gives a straight line?
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