Question

At what rate should $1,000 be invested compounded

continuously to produce a final balance of $2,000 in
5 years?
A. 0.139%
B. 0.231%
C. 13.863%
D. 23.105%

Answer 1

14.9%

Explanation:

Using the compound interest formula;

A = P(1+r)^t

A is the amount = $2000

P is the principal = $1000

r is the rate

T is the time = 5 years

Substitute the given values into the formula;

2000 = 1000(1+r)^5

2000/1000 = (1+r)^5

2 = (1+r)^5

`\sqrt[5]{2} \\` = 1 + r

r = 1.149 - 1

r = 0.149%

Hence the required rate is 14.9%