Yout Wed 4pm lnstructions: Worksheet 6: Section 5.4, 5.5 (Additional Application

Question

Yout Wed 4pm lnstructions: Worksheet 6: Section 5.4, 5.5 (Additional Applications of Integration) Math 242, Spring 18, Young 5. Suppose that you have a credit card that gives you cash rewards for purchases you make with the card. Suppose that the credit card company gives you an option of two ways to redeem your rewards. The first is that after a year of using the card, you can have a lump sum deposited into your account; suppose that you know that based on how much you will use the credit card, the lump sum they would deposit would be $500. The second option is that you can have rewards continuously deposited into your bank account over the course of the year. Suppose that you know that based on how much you will use the card, the amount they will deposit will be $490, deposited continuously over the course of the year. Suppose that the bank account that this will bedeposited take? Justify your answer. into earns 5% annual interest, compounded continuously, which option should

Explanation / Answer

I would go for the second option.

If you choose the first option you will be getting 500$ by the end of the year and the interest will be calculated for the same (Simple Interest).

But when you choose the second option, your rewards will be deposited monthly into your account and you will be given 5% interest for the same on a monthly basis. (Compound interest)

So the end of the year, you will be benifited if you choose option 2 as the principal amount keeps changing every month and the interest will be given accordingly.

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