Question

If you were to place $2,500 in a savings account that pays 5% interest compounded continuously, how much money will you have after 10 years? Assume you make no other deposits or withdrawals.

How would I go about finding this?

Answer 1

But using the formula makes this much simpler, P(1+r/n)^nt
F = Future value
P = present value
r = annual interest rate written as a decimal
t = number of years
F = 2500(2.71)^0.5
= 4121.8

Answer 2

You will get $4121.80 after 10 years.

Solution-

You added $2,500 in a savings account with a 5% interest compounded continuously for 10 years.

The formula for continuous compounding is,

`A=Pe^(r\cdot t)`

Where,

A = Future amount

P = Principal = $2500

r = Rate of interest = 5% = 0.05

t = Time period = 10 years

Putting the values,

`A=2500e^(0.05* 10)`

`=2500e^(0.5)\\\\=\$4121.80`