Jose invested $50,000 for 2 years at an annual interest rate of 4 percent compounded yearly. Patricia invested $50,000 for the same period of time, at the same interest rate, but the interest was compounded quarterly. To the nearest dollar, how much more money did Patricia's investment earn than that of Jose?
Thanks a bunch!
F= P (1=i)^n Where F = future value P = initial value (50000) i= periodic interest n = number of periods
Jose : F = 50, 000 (1+ .04)^2 = 54,080
Patricia i = periodic interest where the period is 3 mos (4 times a year) .04/4 = .01 and periods = 2 yrs x 4/yr = 8
F= 50,000 (1 +.01)^8 = 54142.84
Difference =62.84 to the nearest dollar , Patricia earned $64 more than Jose.