you wish to invest $100,000 for 5 years. which fund will yield the highest return after 5 years? fund 1: 5%…

you wish to invest $100,000 for 5 years. which fund will yield the highest return after 5 years? fund 1: 5% interest compounded quarterly fund 2: 4.8% interest compounded continuously fund 1 fund 2 question 8 1 pts based on the previous question, how much more interest will the higher - yielding fun earn than the lower - yielding fund (round to the nearest cent)?

you wish to invest $100,000 for 5 years. which fund will yield the highest return after 5 years? fund 1: 5% interest compounded quarterly fund 2: 4.8% interest compounded continuously fund 1 fund 2 question 8 1 pts based on the previous question, how much more interest will the higher - yielding fun earn than the lower - yielding fund (round to the nearest cent)?

Answer

Explanation:

Step1: Calculate final - amount for Fund 1

The compound - interest formula is $A = P(1+\frac{r}{n})^{nt}$, where $P=$100000$, $r = 0.05$, $n = 4$ (quarterly compounding), and $t = 5$. $A_1=100000(1 +\frac{0.05}{4})^{4\times5}=100000(1 + 0.0125)^{20}$. $A_1=100000\times(1.0125)^{20}\approx100000\times1.282037\approx$128203.72$. The interest earned $I_1=A_1 - P=128203.72-100000=$28203.72$.

Step2: Calculate final - amount for Fund 2

The continuous - compounding formula is $A = Pe^{rt}$, where $P = 100000$, $r=0.048$, and $t = 5$. $A_2=100000e^{0.048\times5}=100000e^{0.24}$. $A_2\approx100000\times1.271249\approx$127124.92$. The interest earned $I_2=A_2 - P=127124.92 - 100000=$27124.92$.

Step3: Calculate the difference in interest

$I = I_1 - I_2=28203.72-27124.92=$1078.80$.

Answer:

$1078.80$