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Compounded Interest

  1. Nov 6, 2013 #1
    1. The problem statement, all variables and given/known data
    Assume that you can earn 6% on an investment, compounded daily. Which of the following options would yield the greatest balance after 8 years?
    -$20,000 now
    -$30,000 after 8 years
    -$8000 now and $20,000 after 4 years
    -$9000 now, $9000 after 4 years, and $9000 after 8 years


    2. Relevant equations
    A=P(1+r/n)^n

    3. The attempt at a solution
    I understand how to use the equation, where P is the investment, r is the interest rate, and n is the number of times interest is compounded, but I don't understand the last three choices. What does it mean by "$9000 now, $9000 after 4 years, and $9000 after 8 years"?
     
  2. jcsd
  3. Nov 6, 2013 #2
    You invest $9000 now, you invest another $9000 four years from now, and you invest another $9000 eight years from now.
     
  4. Nov 6, 2013 #3
    Okay. I was sort of thinking that, but I wanted to be completely sure. Many thanks!
     
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