After making an investment at an annual interest rate of 4% compounded continuou

Question

After making an investment at an annual interest rate of 4% compounded continuously for t years, your balance is $B, where B =f(t). 1. What are the units of dB/dt? a. b. What is the financial interpretation of dB/dt? After making an investment at an annual interest rate of 1% compounded continuously for 10 years, your ending balance is $B, where B a. Give a financial interpretation of g(5)=1649 b. What are the units of g'(r)? C. Give a financial interpretation of g,(5)=165. d. Estimate the value of g(6). 2.

Explanation / Answer

1)

B=f(t)

a)

units of dB/dt are dollars/year

b)

dB/dt gives the rate of increase in balance after t years when compounded continously at annual interest of 4%

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2)

a)

g(5)=1649

after making an investment at an annual rate of 5% compounded continously for 10 years ,your ending balance is $ 1649

b)

units of g'(r) are dollars/percent

c)

balance is increasing at 165 dollars per percent when compounded continously at annual interest of 5% for 10 years

d)

g(6)=(g(5))+((g'(5))*(6-5))

g(6)=(1649)+(165*(6-5))

g(6)=1814

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