Question 1
Suppose you invest $50 000 in a special savings account
where, for the first ten years, interest of 6% is
paid annually at the end of each year and, thereafter, interest is continuously compounded at an annual
equivalent rate of 7%. How much money do you have in the account after 14 years if you remove no money
from it during that period?
Question 2
You plan to invest an amount C of capital. Every year the current amount will earn interest at r% per year,
compounded annually. You will also add an amount 0.1 C at the end of every year. Set up a recurrence
relation for yt, the amount you have after t years. Find an expression for yt and determine when you will
have 10 C capital.
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