Omar was 8 years old when he received $25,000 dollars from his grandmother’s estate. His father invested the money for him in a fund that earned 6% annual interest compounded quarterly. Omar’s father was hoping to see the investment double by the time Omar was ready for college. Another fund offered the same interest rate but the interest was compound continuously. This second fund was a little riskier, however. Homework Help ✎
Write an equation to represent each situation.
What is the doubling time for each account? Which method of compounding the interest will double the money faster?
Is the difference in doubling time worth the extra risk?
2 = (1.015)4t 2 = e0.06t
Solve both equations for t.
What is the difference in doubling time?