Question

Randy deposits $9,500 in an IRA. What will be the value of his investment in 3 years if the investment is earning 1.75% per year and is compounded continuously? Round to the nearest cent.

Answer 1

$10,012.07

Explanation:

Identify the values of each variable in the formula. Remember to express the percent as a decimal.

APrt=?=$9,500=0.0175=3 years

For compounding continuously, use the formula A=Pert.

Substitute the values into the formula and compute the amount to find

AA=9,500e0.0175⋅3=$10,012.07.

Answer 2

The value of his investment in 3 years = $10007.53

Explanation:

Compound interest

A = P[1 +R/n]^nt

Where A - amount

P - principle amount

R = rate of interest

t - number of years

n - number of times compounded yearly

To find value if investment

Here P = $9500, R = 1.75% = 0.0175 n = 1 and t = 3

A = P[1 +R/n]^nt

= 9500[1 + 0.0175/1]^(1 * 3)

= 10007.53