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.

1 Answer
Mar 1, 2017

Answer:

#$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