Question

if $350 is borrowed at 25% interest, find the amount due at the end of 3 years if the interest is compounded continuously. select the correct answer. question 8 options: $1,090.95 $740.95 $660.79 none of those $402.12 $624.28

Answer 1

(b) $740.95

Explanation:

You want the value of $350 after 3 years when interest is 25% per year compounded continuously.

Continuous compounding

The formula for the balance resulting from continuous compounding is ...

A = Pe^(rt)

where P is the amount borrowed, r is the annual rate, and t is the number of years.

Application

For r=0.25 and t=3, the $350 grows to ...

A = $350·e^(0.25·3) = $350·e^0.75 ≈ $740.95

The amount due after 3 years is $740.95.