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Simple and Compound Interest and Certificates of Deposit

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Take the current amount you have in your checking or savings account. Suppose you have a choice of keeping your money for five years in a savings account with a 2% interest rate, or in a five year certificate of deposit with and interest rate of 4.5%. Calculate how much interest you would earn with each option over five years time with continuous compounding.

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Solution Summary

This solution shows calculations and solves for the amount of interest.

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