29. Comparing Investments Russ, who is self-employed, wants to invest $60,000 in a pension plan. One investment offers 3% compounded quarterly. Another offers 2.75% compounded continuously.(a) Which investment will earn more interest in 5 yr?(b) How much more will the better plan earn?

Question
Asked Nov 17, 2019
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29. Comparing Investments Russ, who is self-employed, wants to invest $60,000 in
a pension plan. One investment offers 3% compounded quarterly. Another offers
2.75% compounded continuously.
(a) Which investment will earn more interest in 5 yr?
(b) How much more will the better plan earn?

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Expert Answer

Step 1

 For investment offers 3% compounded quarterly, let A1 be the future value of investment including interest. Then , we have

A P 1
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A P 1

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Step 2

By, substituting P=$60000, r=0.03, n=4, t=5, we have

45
0.03
60000 1+
A
4
A $69671.05
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45 0.03 60000 1+ A 4 A $69671.05

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Step 3

For investment offers 2.75% compounded continuously, let A2 be the f...

A Pe"
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A Pe"

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