Learning Resources
Lesson
You should readily recall the formula in Focus L used to calculate the value of an investment, after one year, with n compounding periods.
The part of the formula significant in determining the value of the investment is 
.
You will now investigate the behaviour of this function as n, the number of compounding periods, increases. What do you think will happen to the value of the investment?
Proceed with the Investigation on page 183 of your text. Hints and suggestions provided are to be used only if needed. You may want to view the suggestion for Step A as it involves using the calculator to generate the required table.
A summary of the Investigation is provided.
Notebook Entry: Record the following:
- The formula to be used to calculate the value of an investment when compound interest is involved.
- The formula to be used to calculate the value of an investment when continuous interest is involved.
Answer the Investigation Questions.
An example dealing with continuous interest is completed below.
Activity
C.Y.U. page 185 #'s 9 - 11
When you have completed these questions, ask your on-site teacher to get the solutions for you from the Teacher's Resource Binder and check them against your answers. After you do this, if there is something you had trouble with and still do not understand, contact your on-line teacher for help.
Test Yourself
Joe invested $10 000 at a rate of 7% with continuous interest.
- What is the value of the investment after 1 year?
- What is the value of the investment after 5 years?
- What would be the value of the investment after one year, if the 7% interest was compounded semiannually?
Solutions
