Question

Nancy borrows $5000 at a rate of 16% interest per year. What is the amount due at the end of 5 years if the interest is compounded continuously?

$800
$11,127.70
$5,800
$11,000

Answer 1

option 2

Explanation:

Given that Nancy borrows 5000 dollars at the rate of 16% per year compounding continuously.

Principal =5000

Rate of interest =16%

Period = 5years

Interest is compounding continuously

AS per compounding interest formula we have

Final amount due =
`Pe^(rt) \\=5000(2.718^(5(0.16)) \\=5000(2.7183)^(0.8) \\=\\11127.70`

Option 2 is right