Question

If $396 is invested at an interest rate of 13% per year and is compounded continuously, how much will the investment be worth in 3 years?

Answer 1

`\$584.88`

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=3\ years\\ P=\$396\\ r=0.13`

substitute in the formula above

`A=\$396(e)^(0.13*3)=\$584.88`

Answer 2

if the interest is compound (yearly) then is calculated by
A = P (1+r)^(t)

then after 3 years the investment will worth

396(1.13)^3 = $571.38