Question

What is the value of a $5000 investment after 18 years, if it was invested at 4% interest

compounded continuously?
1) $9,367.30
2) $9,869.39
3) $10,129.08
4) $10,272.17

Answer 1

Explanation:

P(t) = P0 * e^rt

=> P(18) = $5000 * e^(0.04 * 18) = $10,272.17. (4)

Answer 2

D

Explanation:

Continuous compound is given by the following formula:

`A=Pe^(rt)`

Where A is the ending amount, P is the initial amount, e is Euler's number, r is the rate, and t is the time in years.

We have a $5000 investment at 4% or 0.04 for 18 years. Therefore:

`A=5000e^((0.04)(18))`

Use a calculator:

`A\approx\$ 10272.17`

Hence, our answer is D.