Question

Sven accumulated $17,600 in credit card debt. If the interest rate is 2% per year and he does not make any payments for 12 years, how much will he owe on this debt in 12 years by compounding continuously?

Answer 1

Sven will owe approximately $22,412.48 on his credit card debt in 12 years by continuously compounding.

Step-by-step explanation:

To calculate the amount Sven will owe on his credit card debt in 12 years by continuously compounding, we can use the formula for compound interest:

Amount = Principal * e^(rate * time)

Where:

• Principal = $17,600
• Rate = 2% or 0.02
• Time = 12 years
• e = Euler's number (approximately 2.71828)

Now, let's substitute these values in the formula:

Amount = $17,600 * e^(0.02 * 12)

Amount = $17,600 * e^0.24

Amount = $17,600 * 1.271249

Amount = $22,412.48

Therefore, Sven will owe approximately $22,412.48 on his credit card debt in 12 years by continuously compounding.