The balance B of a savings account after t years when a principal P is invested

Question

The balance B of a savings account after t years when a principal P is invested at an annual interest rate r and the interest is compunded yearly is given by:

B=P*(1+r)^t

If the interest is compounded continuously, the balance is given by:

B=P*e^(r*t)

An amount of $40,000 is invested for 20 years in an account that pays 5.5% interest and the interest is compounded yearly. Use MATLAB to determine how many fewer days it will take to earn the same if the money is invested in an account where the interest is compounded continuously.

Explanation / Answer

40000*(1+0.055)^20$116710

40000*e^(0.055*19.469246)$116710==>365.25*0.469246171.4 days

365.25-171.4193.9 days fewer

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