Question 1

Suppose you invest $50 000 in a special savings account where, for the first ten years, interest of 6% is

paid annually at the end of each year and, thereafter, interest is continuously compounded at an annual

equivalent rate of 7%. How much money do you have in the account after 14 years if you remove no money

from it during that period?

Question 2

You plan to invest an amount C of capital. Every year the current amount will earn interest at r% per year,

compounded annually. You will also add an amount 0.1 C at the end of every year. Set up a recurrence

relation for yt, the amount you have after t years. Find an expression for yt and determine when you will

have 10 C capital.