Question

11) The Hillmans have $12,000 in a savings

account. The bank pays 1.25% interest on
the savings account, compounded
continuously.
Find the total balance after three years.
A) $12,290.21
C) $11,345.89
B) $12,458.54
D) $11,452.16

Answer 1

To find the total balance after three years, we can use the formula for continuous compounding:

A = Pe^(rt)

Where A is the total balance, P is the principal (initial amount), e is Euler's number (approximately 2.71828), r is the annual interest rate as a decimal, and t is the time in years.

In this case, P = $12,000, r = 0.0125 (1.25% expressed as a decimal), and t = 3. Plugging these values into the formula, we get:

A = $12,000 x e^(0.0125 x 3)

A = $12,000 x e^(0.0375)

A = $12,000 x 1.038163

A = $12,458.54

Therefore, the total balance after three years is $12,458.54.