Compounded Monthly

Section 3.5
Question 14



For all word problems, I am interested in the set up. I will do the work on paper and only return here if needed.

My Set Up:

A = p(1 + i)^(t)

500,000 = p(1 + 0.015)^(15)

In 15 years there are 180 months. Should t be 180 months or 15?

 

A = p(1 + r/n)^(n*t)
where n=12 (number of months)
r= 3(1/2)%=3.5% -> convert to decimal: r=0.035
t=15 years

 

How silly of me. I know that 3_1/2 = 7/2 = 3.5, which becomes 0.035 in terms of r here. Now that I have the correct formula and set, I'll take it from here.