4.0k views
2 votes
An investment account opens with an initial deposit of $12,000 earning 7.2% interest compounded continuously. What will the account be worth after 30 years?

A. $62,293.85
B. $68,945.22
C. $75,874.36
D. $82,109.98

User Deneen
by
7.8k points

1 Answer

3 votes

Final answer:

Using the formula for continuous compounding, A = Pert, with an initial deposit of $12,000, an annual interest rate of 7.2%, and a time span of 30 years, the investment would be worth approximately $103,912.08, which does not match any of the provided options.

Step-by-step explanation:

To calculate the future value of an investment account with continuous compounding, you use the formula A = Pert, where P is the principal amount ($12,000), r is the annual interest rate (7.2%), and t is the time in years (30 years). The constant e is approximately 2.71828, which is the base of the natural logarithm.



Plugging the values into the formula gives us:



A = 12000 * e(0.072*30)



Performing the calculation:



A = 12000 * e2.16



A = 12000 * 8.65934004 (using a calculator for e2.16)



A ≈ $103,912.08



However, none of the provided options matched this calculation. It seems there might have been a misunderstanding in the question or the options given do not account for continuous compounding. For continuous compounding, the correct answer would be none of the options above.

User Fedd
by
7.7k points