Question

Solve the problem be using proper methods. Show work.

If you invest $1200 at an interest rate of 1.3% compounded continuously,

a) How much will you have in 5 years?

b) How long will it take for your investment to double?

Answer 1

$1280.59

53 years

Explanation:

To find how much we will get in 5 years, we use the formula:

`A=Pe^(rt)`

P = $1200

r = 1.3% or 0.013

t = 5

Now that we have our values, let's plug them into the formula.

`A=1200e^(0.013(5))`

`A=1200e^(0.065)`

`A=1280.59`

We will have $1280.59 after 5 years.

Now to find how long it will take for our investment to double.

t = ln(A/P)/r

A = 2400

P = 1200

r = 1.3 or 0.013

Let's plug it in.

t = ln(2400/1200)/0.013

t = ln(2)/0.013

t = 53.32 or 53 years