Question

Joseph and Deb deposit $600.00 into a savings account which earns 5% interest compounded

continuously. They want to use the money in the account to go on a trip in 1 year. How much
will they be able to spend?
Round your answer to the nearest cent.

Answer 1

We can use the formula for continuous compound interest to find the balance in Joseph and Deb's savings account after 1 year:

A = Pe^(rt)

where A is the balance, P is the principal (initial deposit), e is the mathematical constant approximately equal to 2.71828, r is the annual interest rate as a decimal, and t is the time in years.

Substituting the given values, we get:

A = $600.00e^(0.05*1)

Using a calculator, we get:

A ≈ $632.57

Therefore, Joseph and Deb will have approximately $632.57 in their savings account after 1 year. They can spend up to this amount on their trip. Rounded to the nearest cent, the answer is $632.57.