So I am pretty comfortable with compound interest problems but I am having problems when I put the rate into the formula. (for example: 8 percent) I dont know whether to put the rate in as 0.08 or just 8. I would assume 0.08, but I ran into two problems. One puting the rate in as 0.08 and one putting the rate in as just 8. Here they are:
1.) If money is invested at r percent interest, compounded anually, the amount of the investement will double in approximately 70/r years. If Pat's parents invested $5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?
(Here they plug just 8 in for r... 70/8 = 8.75 and so forth until they solve the problem. The compound interest formula isnt needed here... is that why 8 percent is not plugged in as 0.08?)
2,) Now here is a straight-forward compound interest problem...
Leona bought a 1-year, $10,000 certificate of deposit that paid interest at an annual rate of 8 percent compounded semi-annually. What was the total amount of interest paid on this certificate at maturity? (here I just plug everything in and when I plug in 8 percent into the formua I will only get the right answer if I plug it in as 0.08)
Yeah, I know this seems really long but this has been bugging me for a while and I was hoping that someone had an explanation for this. Any help would be greatly appreciated... thanks!!!
1.) If money is invested at r percent interest, compounded anually, the amount of the investement will double in approximately 70/r years. If Pat's parents invested $5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?
(Here they plug just 8 in for r... 70/8 = 8.75 and so forth until they solve the problem. The compound interest formula isnt needed here... is that why 8 percent is not plugged in as 0.08?)
2,) Now here is a straight-forward compound interest problem...
Leona bought a 1-year, $10,000 certificate of deposit that paid interest at an annual rate of 8 percent compounded semi-annually. What was the total amount of interest paid on this certificate at maturity? (here I just plug everything in and when I plug in 8 percent into the formua I will only get the right answer if I plug it in as 0.08)
Yeah, I know this seems really long but this has been bugging me for a while and I was hoping that someone had an explanation for this. Any help would be greatly appreciated... thanks!!!
