Question

a college savings fund is opened with a $15,000 deposit. the account earns 6.25% annual interest compounded continuously. what will the value of the account be in 18 years?

Answer 1

The value of the account in 18 years will be $46,275.

How to solve

To calculate the value of the account in 18 years, we will use the formula for continuous compounding:

A =
`P * e^(rt)`

Where:

A is the future value of the account

P is the present value of the account ($15,000)

r is the annual interest rate (6.25%)

t is the time in years (18)

Plugging in the values, we get:

`A = $15,000 * e^(0.0625 * 18)\\A = $15,000 * e^1.125\\A = $15,000 * 3.085\\A = $46,275\\`

Therefore, the value of the account in 18 years will be $46,275.