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From: Stumped
Remote Name: 68.111.68.16
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Date: 12 Aug 2005
Time: 17:23:22 -0500
I'm having some problems from Kellison's Theory of Interest, Chapter 1.5 Problem #14 It is known that $600 invested for two years will $264 in interest. Find the accumulated value of $2000 invested at the same rate of compound interest for three years. This is compound interest, so 600[(1+i)^2] = 824. After multiplying out and subtracting 824 from the other side, I get 600(i^2) + 1200i - 224 = 0. After applying the quadratic formula to this mess, I get approx 0.172 (17.2% interest). 2000[(1+0.172)^3] = $3219.68, but the answer key says it should be $3456. Problem #17 An amount of money is invested for one year at a rate of interest of 3% per quarter. Let D(k) be the difference between the amount of interest earned on a compound interest basis and on a simple interest basis for quarter k, where k=1,2,3,4. Find the ratio of D(4) to D(3) D(4) = (1+.03)^4 - (1+.03x4) = 1.12550881 - 1.12 = 0.00550881 D(3) = (1+.03)^3 - (1+.03x3) = 1.092727 - 1.09 = 0.002727 0.00550881 / 0.002727 = 2.02009901, but the answer key says it should be 1.523. Thanks in advance and someone please help me!