Need help with completing the table below with the amounts you would have if you invested $1,000 for at 5% interest with simple interest and with interest compounded annually. Round to the nearest cent.
Compound Interest
1 year $1050
2 years $
3 years $
4 years $
5 years $

- anonymous

- jamiebookeater

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- anonymous

I know that for the first year it's $1050

- anonymous

Well, the formula for this is Interest = Price * rate * time. So, I is what we need to find. So, I = (1,000) (0.05) (1) is 50. So, for year 1, it is 1,050. Using the same formula, can you figure out the rest?

- anonymous

$1100 for year two?

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- anonymous

Yes. Good Job!

- anonymous

And then $1150

- anonymous

Yes. Just keep using that formula and you should get the rest.

- anonymous

wait but wouldn't this be it for simple interest? We are looking for compound?

- anonymous

hmm.

- anonymous

Well, for compound interest, Amount = Principal * (1 + rate / number of times per year) ^time

- anonymous

You see because I have the values we are getting for the simple interest table, and it's saying I got those values correct. But what I'm trying to do is complete the second column which is titled compound interest values.

- anonymous

That's what I did before but it said my values were incorrect, Can I show you what I did?

- anonymous

Sure.

- anonymous

Ok, so for the first year I did 1000(1+.05/1)^1

- anonymous

I got the fist value which is correct 1050

- anonymous

But for the remaining years here's what I did: 1000(1+.05/2)^2

- anonymous

But I'm assuming my substitution is wrong

- anonymous

Do you happen to see what I'm doing wrong?

- anonymous

are you sure you typed it in right?

- anonymous

Oh! Perhaps you did not do the order of operations. See, do the (1 + 0.05/2) first, then the ^2, and then the 1,000? When doing that I got, 1,050.625.

- anonymous

That's what I got too

- anonymous

It said my answers were wrong. Do you think it could be the rounding to the nearest cent?

- anonymous

I put in 1050.62

- anonymous

Perhaps so. Then it would be 1,050.625 = 1,050.63

- anonymous

That's what I had originally put but it said I'm wrong

- anonymous

Maybe I'll try emailing my instructor

- anonymous

Oh wait. you said you put in 1,050.62. When you round up its .63 not 2?

- anonymous

Ok and for the next years would these be correct then?
$1050.84
$1050.94
$1051.10

- anonymous

They all came out to being wrong when I originally put them in

- anonymous

For year 3, I got 1,033.61...? Double checked it as well.

- anonymous

See if you get that.

- anonymous

I'm not getting that, I must be putting it in wrong

- anonymous

Are both year 4 & 5 wrong as well?

- anonymous

OH. DANGIT. SORRY that's me.

- anonymous

I forgot to change the exponent to 3. So, yes. 1,050.83 is correct =).

- anonymous

Do you mean for year three?

- anonymous

yes.

- anonymous

Because then wouldn't the values just be decreasing and then increasing?

- anonymous

From 1033.61 for year 2 to year 3

- anonymous

I guess thats what it is?

- anonymous

So do the rest of the values for year 4&5 seem correct?

- anonymous

um year 3 is 1,050.83, Year 4 is 1,050.94, and year 5 is 1,051.01. So yes.

- anonymous

it's still incorrect when I put it in, but thank you!

- anonymous

I'll email my instructor and figure it out

- anonymous

Your Welcome! Msg me if you need help again! =)

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