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Expert: - 6/1/2009


Question
Hello Scott,

My name is Ben and I am having a problem answering a question in my finite math course.

A 1000 dollar investment at a rate of 3% compounded monthly and an 1100 dollar investment at a rate of 3.02% compounded annually.

I can figure out each of them separately but when it comes to evaluating when they will equal out I keep coming up with a negative number.


Answer
The interest rate of 3% compounded monthly is
(3%/year)(year/12 months) = 0.25%/month.

That's the same as the amount multiplied by 1.0025 each month.

The value of 1.0025^12 is approximately 1.0304.

This is a an interest rate of 3.04%, which is slightly better than 3.02%.  If $100 was put into this, the interest on the 3.04$ would be $3.04.  The interest on the 3.02% would be $3.02.  As can be seen, the difference would be 2 cents.  

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Scott A Wilson

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I can answer any question in general math, arithetic, discret math, algebra, box problems, geometry, filling a tank with water, trigonometry, pre-calculus, linear algebra, complex mathematics, probability, statistics, and most of anything else that relates to math. I can even tell you it takes me over 2,000 steps to go a mile, but is that relevant?

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My master's paper was published in the OSU journal. The subject of it was Numerical Analysis used in shock waves and rarefaction fans. It dealt with discontinuities that arose over time. They were solved using the Leap Frog method. That method was used and improvements of it were shown. The improvements were by Enquist-Osher, Godunov, and Lax-Wendroff.

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Master of Science at OSU with high honors in mathematics. Bachelor of Science at OSU with high honors in mathematical sciences. This degree involved mathematics, statistics, and computer science. I also took sophmore level physics and chemistry while I was attending college. On the side I took raquetball, but that's still not relevant.

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I earned high honors in both my BS degree and MS degree from Oregon State. I was in near the top in most of my classes. In several classes in mathematics, I was first. In a class of over 100 students, I was always one of the first ones to complete the test. I graduated with well over 50 credits in upper division mathematics.

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