Question

If you deposit $5,000 in an account that earns 2% interest, compounded continuously, how much money will be in the account after seven years?

$5,751.37

$5,743.43

$5.101.01

None of the above

Answer 1

$5751.37

Explanation:

The key phrase here is "compounded continuously". This phrase tells you that you must use the following equation:

`A=Pe^(rt)`

Where A is the final amount, P is the principal amount, e is the exponential constant, r is the rate in decimals and t is time. By plugging in our known values given we obtain:

`A=5000e^(0.02 * 7)=5751.37`