Question

Lee opened a savings account 6 years ago and has not made any transactions since.The account balance is currently $3,204.00 what was the initial deposit if the account pays an annual interest rate of 8.5% compounded continuously

Answer 1

Future value = $3,204

time = 6 years

interest rate (r) = 8.5% = 8.5/100 = 0.085 (decimal form)

Formula:

Future value = Present value x e^ (r*t)

Replace:

3,204 = PV x e^ (0.085 *6 )

Solve for PV ( present value or initial value )

3,204 = PV x e^ (0.51)

3,204 / e^ (0.51) = PV

PV = 1,923.98