Interest rate compounded continuous

Question
If you invest $6,700 in an account paying 8.5% compounded continuously, how much money will be in the account at the end of 4.5 years?



Solution
Solution 1
Investment (1 + interest rate)time
$6,700 (1.085)4.5
$6,700 (1.44356)
$9,671.83



Solution 2

Year
Investment
Interest
Balance
1
$6,700.00
$569.501
$7,269.50
2
$7,269.50
$617.91
$7,887.41
3
$7,887.41
$670.23
$8,557.64
4
$8,557.64
$727.40
$9,279.04
4.5
$9,279.04
$394.36
$9,673.40

NOTE: The difference in the final answers are due to rounding off.

Please do not forget to leave a feedback in Allexperts.com AND a comment in this blog. ALSO, if you want a copy of the Excel file for the above table, please say so in a comment in this post.

Investment Allocation

Question
Mike invested $2000 in bonds and certificate of deposits. the bonds paid 5% and the CD's paid 4.5% if his total interest earned was $93.75 for the year, how much did he invest in each type?




Solution
Let x = investment in bonds
2000-x = investment in certificate of deposits

Therefore, .05x + .045(2000-x) = 93.75

Hence, x = $750

Therefore, Mike needs to invest $750 in bonds and $1,250 in certificate of deposits.

You may also want to check Investment Allocation
Please do not forget to leave a feedback in Allexperts.com AND a comment in this blog.

Investment allocation

Question
Need to know how much of 4200 investment was at 15% and how much of 4200 investment was at 8% to equal profit of 448.



Solution
If you have available funds for investment and you want to create an investment plan in order for you to achieve a certain return on investment, then there is a need to allocate your investments.

For the investment problem above, the target return on investment of $4,200 is $448 and the investment portfolio is comprised of an investment with a return of 15% and another with a return of 8%.

So, how do we compute for the funds to be allocated to each investment option?

Let x = investment with a return of 15%
(4,200-x) = investment with a return of 8%

Therefore, the expected return on investment is .15x + .08(4,200-x) = 448

Simplify .07x + 336 = 448

Isolate x
x = $1,600

Therefore, the investor needs to invest $1,600 in the investment with an expected return of 15% and $2,600 in the investment with an expected return of 8% to achieve a portfolio rate of return of 10.67% or $448.

Please do not forget to leave a feedback in Allexperts.com AND a comment in this blog.