You deposit $50,000 in a bank account at 15% annual interest

Finance Jan 15, 2021

You deposit $50,000 in a bank account at 15% annual interest.
a. If no withdrawals are made, how much will you have in the account after 3 months?
b. How much would you have after 3 months if interest is compounded continuously?

Expert Solution

Answer a)

Interest = Principle * Rate * Time

= 50,000 * 0.15 * 3 / 12

= 1875

Answer b)

Future Value = Present Value * e^(r*t)

r = 0.15

t = 3 /12 = 0.25

= 50,000 * e^(0.15*0.25)

= 50,000 * 1.03821199708

= 51910.60

Interest = 51910.60 - 50000 = 1910.60

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