Question

Natasha’s parents set up a college fund for her by investing $20,000 at 6 percent, compounded continually. Using the compound interest formula, determine the approximate worth of Natasha’s fund after four years. (Use 2.718 for e.)

Answer 1

The approximate worth of Natasha’s fund after four years is approximately $25,424.98.

Step-by-step explanation:

To determine the approximate worth of Natasha’s college fund after four years, we can use the formula for compound interest:

A = P * e^(rt)

Where:

• A is the amount of money in the account after t years
• P is the principal investment amount
• r is the annual interest rate (as a decimal)
• t is the number of years
• e is a mathematical constant approximately equal to 2.718

Plugging the values into the formula:

A = $20,000 * 2.718^(0.06 * 4)

A ≈ $20,000 * 2.718^0.24

A ≈ $20,000 * 1.271249

A ≈ $25,424.98

Therefore, the approximate worth of Natasha’s fund after four years is approximately $25,424.98.