Question

Suppose you invest $5000 at an annual interest rate of 6.3% compounded continuously. How much will you have in the account after 3 years? Round the solution to the nearest dollar.

Answer 1

`$6040.20` to 2 decimal places

Explanation:

Continuous compound interest is where the exponential value of `e` comes in.

Instead of using `P(1+x/(nxx100))^n` the bracketed part is replaced by `e~~2.7183`

So we have:

`$5000 (e)^n`

But in this case `n` not just the count of years/cycles

`n=x%xxt" "`where `t->`count of years

So `n=6.3/100xx3 = 18.9/100` giving:

`$5000(e)^(18.9/100) =$6040.2047...`

`$6040.20` to 2 decimal places