



 
Hi Lilly, The usual way this type of problem is given is to say
The answer to b) is larger than the answer to a) because in b) you have compounded 5 365 times and in a) you have only compounded 5 times. Suppose that the answer for a) was $16 000 then the answer for b) is larger and hence you can reduce the annual rate used for b) a little until you get an answer of $16 000 for that calculation also. The expression used for this type of problem is
where P is the amount you lend your friend, A is the amount he owes you at the end of t years, r is the annual interest rate and n is the number of times per year you compound. In your example
Penny  


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