Question

Grace is going to invest $650 and leave it in an account for 15 years. Assuming the

interest is compounded continuously, what interest rate, to the nearest tenth of a

percent, would be required in order for Grace to end up with $1,490?

Answer 1

5.5%

Explanation:

You want the interest rate that can be compounded continuously to give $1490 from an investment of $650 after 15 years.

Value

The formula for account value with continuously compounded interest is ...

A = Pe^(rt) . . . . P=principal, r=interest rate, t=years

Interest rate

Solving for r, we find ...

ln(A/P)/t = r

ln(1490/650)/15 = 0.0553...

The interest rate is about 5.5%.

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