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As an incentive to attract savings deposits, most financial institutions today offer daily and even continuous compounding. This means that savings, or passbook, accounts, as
As an incentive to attract savings deposits, most financial institutions today offer daily and even continuous compounding. This means that savings, or passbook,
accounts, as well as certificates of deposit CDs earn interest compounded each day or even more frequently, such as every hour or even every minute. Continuous
compounding, in which compounding occurs every instant, involves a different formula that is derived from the formula we've been using. Let's take a look at daily
compounding.
To calculate the compound amount, of an investment with daily compounding, use the compound interest formula modified as follows:
Rate per period dailynominal interest rate, divided by
Number of periods days number of days of the investment.
Calculator Sequence: Round your answers to the nearest cent.
a On April Thomas Ash deposited $ in a passbook savings account at interest compounded daily. What is the compound amount in $ of his account on
August
$
b Using daily compounding, calculate the compound amount in $ of a $ investment for each of the three CDs
The First National Bank is offering a year CD at interest.
The Second National Bank is offering a year CD at interest.
The Third National Bank has a year CD at interest.
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