A savings account starts with \(\$10{,}000\) and earns \(6\%\) annual interest. The table gives its balance \(B(n)\) after one year when interest is added \(n\) times.
<table><tr><th>Times interest is added, \(n\)</th><td>1</td><td>4</td><td>12</td><td>52</td><td>365</td><td>3650</td></tr><tr><th>Balance after one year (dollars)</th><td>10,600.00</td><td>10,613.64</td><td>10,616.78</td><td>10,618.00</td><td>10,618.31</td><td>10,618.36</td></tr></table>
a) Estimate \(\lim_{n\to\infty}B(n)\) to the nearest dollar using the table.
b) How much more does the account earn with daily instead of monthly compounding? Use the table and round to the nearest cent.
c) Can you determine the limiting balance to the nearest cent from these six rounded entries? Explain.
Hints
- Compare the last few balances as the number of interest payments increases.
- Which two columns correspond to monthly and daily interest?
- Compare the precision requested in part c) with the change between the last two balances.
Solution
1. The balances increase, but by smaller amounts as \(n\) grows. The last values suggest a limit near \(\$10{,}618\), to the nearest dollar.
2. The table gives a daily balance of \(\$10{,}618.31\) and a monthly balance of \(\$10{,}616.78\). Their difference is \(\$1.53\).
3. No. The last two displayed balances are still \(\$0.05\) apart, and the table contains only selected values. It does not determine the limiting balance to the nearest cent.
Answer
a) Approximately \(\$10{,}618\).
b) \(\$1.53\) more.
c) No. The displayed values still differ by \(\$0.05\), so they do not fix the limiting balance to the nearest cent.