Parents of a newborn baby are given a gift of $16,000 and will choose between two options to invest in their child’s college fund. Option 1 is to invest the gift in a fund that pays an average annual interest rate of 5% compounded monthly; Option 2 is to invest the gift in a fund that pays an average annual interest rate of 3.75% compounded continuously. Assuming each investment has a term of 18 years, calculate the value of each investment and round your answer to the nearest penny.

College Algebra
1st Edition
ISBN:9781938168383
Author:Jay Abramson
Publisher:Jay Abramson
Chapter6: Exponential And Logarithmic Functions
Section6.1: Exponential Functions
Problem 68SE: An investment account with an annual interest rateof 7 was opened with an initial deposit of 4,000...
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Parents of a newborn baby are given a gift of $16,000 and will choose between two options to invest in their child’s college fund. Option 1 is to invest the gift in a fund that pays an average annual interest rate of 5% compounded monthly; Option 2 is to invest the gift in a fund that pays an average annual interest rate of 3.75% compounded continuously. Assuming each investment has a term of 18 years, calculate the value of each investment and round your answer to the nearest penny.

option 1

option 2

 

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