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Geometric sequence, find the best interest option over a year

  1. Jun 27, 2012 #1
    1. The problem statement, all variables and given/known data

    The Bank of Utopia offers an interest rate of 100% per annum with various options as to how the interest may be added. A man invests $1000 and considers the following options.
    Option A - Interest added annually at the end of the year.
    Option B - Interest of 50% credited at the end of each half-year.
    Option C, D, E, ... The Bank is willing to add interest as often as required, subject to (interest rate) x (number of credits per year) = 100
    Investigate to find the maximum possible amount in the man's account after one year.

    2. Relevant equations

    3. The attempt at a solution

    So I took 1000(1 + (1/x)^x as the amount in the man's account by the end of the year, where x is the number of credits per year. I'm fairly sure this amount increases to infinity as x increases, but the differences between the amounts as x (x remaining an integer) increases must tend toward zero (considering the question). Since this is a section on geometric series I'm wondering if I'm supposed to salvage a geometric series out of this and calculate it's sum to infinity, but I have no idea which series to look for. Any suggestions would be appreciated, cheers.
     
  2. jcsd
  3. Jun 27, 2012 #2

    eumyang

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    Actually, the amount doesn't increase to infinity. Try putting in larger and larger values of x into a graphing calculator or spreadsheet and see what happens.
     
  4. Jun 27, 2012 #3

    Curious3141

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    Hmm...sounds like they want you to discover the letter 'e'. :biggrin:

    Look up Napier's constant, also known as the base of natural logarithms.
     
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