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(KEY) M114 Hw19 - Completion
(KEY) M114 Hw19 - Completion
0.021 365(3)
In 3 years, the account has a growth factor of (1 + ) = 1.065. This represents
365
an increase of 6.5%.
In 3 years, the account has a growth factor of 𝑒 0.02(3) = 1.0618. This represents an
increase of 6.18%.
2. Suppose you put $2000 into an account with 5.4% APR compounded continuously.
2b. What is the APY? Describe the meaning of the APY in a sentence.
The APY is 𝑒 0.054 − 1 = 0.055485 = 5.5485%. This means the account actually grows
by 5.5485% per year.
2c. Use your understanding of the APY to find the balance after 1 year.
Take the initial $2000 and increase by 5.5485% to get 2000(1.055485) = $2110.97.
Alternatively, use 𝑓(1) = 2000𝑒 0.054(1) = $2110.97.