In order to make CDs look more attractive as an investment than they really are, some banks advertise that their rates are higher than their competitors’ rates; however, the fine print says that the rate is based on simple interest. If you were to deposit $10,000 at 10% per year simple interest in a CD, what compound interest rate would yield the same amount of money in 3 years? Solve by formula and write the spreadsheet function to display the i value.
What will be an ideal response?
Simple: F = 10,000 + 10,000(3)(0.10)
= $13,000
Compound: 13,000 = 10,000(1 + i) (1 + i) (1 + i)
(1 + i) 3 = 1.3000
3log(1 + i) = log 1.3
3log (1 + i) = 0.1139
log(1 + i) = 0.03798
1 + i = 1.091
i = 9.1% per year
Spreadsheet function: = RATE(3,,-10000,13000) displays 9.14%
You might also like to view...
What affect will a failure of the agitator have on the operation of a reactor? (Select all that apply.)
a. Reduced yield b. Off-spec product c. Poorly mixed reactor contents d. High temperatures in the reactor
To test a grinding stone for cracks ____.
A. tap the stone in four places and listen for a ring B. visually inspect the stone C. shine a light under the stone D. wet the stone and look for bubbles
Arc burn is caused by:
A) Ultraviolet rays B) Infrared rays C) Visible rays D) All of the above
The operation of the timer may be thrown off if they are located in rungs that are jumped over.
Answer the following statement true (T) or false (F)