Question

If you can invest money at a rate of 8.5% compounded continuously, and you want to have 34,000 at the

end of 15 years, how much do you need to invest initially?

Answer 1

Explanation:

The formula to compound continuously is

`A(t)=Pe^((r)(t))` where

A(t) is the amount after all the compounding is done,

P is the initial investment,

r is the interest rate in decimal form, and

t is the time in years.

For us, that looks like this:

`34000=Pe^((15)(.085))` and

`34000=Pe^(1.275)`

When you raise e (Euler's number) on your calculator to that power you get

34000 = P(3.57870141) and

P = 9500.65