As shown in Example 5.6.8, if a bank pays interest at a rate of i compounded m times a

Chapter 5, Problem 22

(choose chapter or problem)

As shown in Example 5.6.8, if a bank pays interest at a rate of i compounded m times a year, then the amount of money \(P_{k}\) at the end of k time periods (where one time period = 1/mth of a year) satisfies the recurrence relation \(P_{k} = [1 + (i/m)]P_{k−1}\) with initial condition \(P_{0}\) = the initial amount deposited. Find an explicit formula for \(P_{n}\) .

Text Transcription:

P_k

P_k = [1 + (i/m)]P_k−1

P_0

P_n

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