Question

How much would you have to deposit in

an account with a 9% interest rate,
compounded continuously, to have $1500
in your account 5 years later?

Answer 1

$956.44

Explanation:

You want the amount to deposit into an account earning 9% compounded continuously if you want the value to be $1500 after 5 years.

Continuous compounding

The formula for the account value is ...

A = Pe^(rt)

We want to find P when A=1500, r=0.09, t=5:

1500 = P(e^(.09·5))

1500/e^(0.45) = P ≈ 956.44

You have to deposit $956.44 in the account.

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