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Compounded interest follows a relatively straightforward formula: P(1+r)^t Where: P = Principal amount r = rate of return t = time elapsed In this case, we know all of this information: P = $100 r = 4% = 0.04 t = 1993 - 1880 = 113 years So we can calculate using the formula above: P(1+r)^t 100(1 + 0.04)^113 = 100(1.04)^113 = 100(84.0945) = 8409.45 Therefore, at a rate of 4%, the granddaughters claim they are owed $8409.45. If the rate is 8%, we repeat the same steps as follows: P(1+r)^t 100(1 + 0.08)^113 = 100(1.08)^113 = 100(5982.52) = 598252.29 Therefore, at a rate of 8%, the granddaughters claim they are owed $598,252.29 This difference in rates is actually meant to show how when interest is compounded, it's rate of growth is exponential. In this example, you can see that the growth rate at 8% is far more than double the growth rate at 4%. I hope this helps you understand the concept of compounded interest :)

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13y ago

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