interest rate problem- mutual fund/bank account

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lucky13

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I need to analyze the earnings of a mutual fund account. 2 years ago the value was $26,000, and it is now worth $31,000. If the account is compared to a bank account paying interest that is compounded continuously, what interest rate would the bank account have to pay to match the mutual fund accounts interest?
(Assume the only deposit was to open the account)
 
lucky13 said:
I need to analyze the earnings of a mutual fund account. 2 years ago the value was $26,000, and it is now worth $31,000. If the account is compared to a bank account paying interest that is compounded continuously, what interest rate would the bank account have to pay to match the mutual fund accounts interest?
(Assume the only deposit was to open the account)
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What model is used for continuous compounding?
 
I need to analyze the earnings of a mutual fund account. 2 years ago the value was $26,000, and it is now worth $31,000. If the account is compared to a bank account paying interest that is compounded continuously, what interest rate would the bank account have to pay to match the mutual fund accounts interest? (Assume the only deposit was to open the account)

Fv = Pe^Yn for continuous compounding
Fv = P(1 + i)^Yn for specific compounding periods
should give you a running start

F = the future value
P = the present value
Y = the number of years over which the compounding takes place
n = the number of compounding, or interest bearing, periods per year
i = the decimal annual interest rate divided by the number of interest bearing periods per year.

Good luck
 
Fv = Pe^Yn for continuous compounding
Fv = P(1 + i)^Yn for specific compounding periods

Where do I plug the numbers into on those formulas?
 
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