Question

Rochelle deposits $5,000 in an IRA. What will be the value of her investment in 25 years if the investment is earning 8% per year and is compounded continuously? Round to the nearest cent.

Answer 1

`\$36,945.28`

Explanation:

we know that

The formula to calculate continuously compounded interest is equal to

`A=P(e)^(rt)`

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

e is the mathematical constant number

we have

`t=25\ years\\ P=\$5,000\\ r=8\%=8/100=0.08`

substitute the values in the formula

`A=5,000(e)^(0.08*25)`

`A=5,000(e)^(2)`

`A=\$36,945.28`