Question

On the day of a child’s birth, a deposit of $25,000 is made in a trust fund that pays 8.75% interest, compounded continuously. Determine the balance in this account on the child’s 25th birthday.

Answer 1

9514 1404 393

Answer:

$222,822.57

Explanation:

The account balance is given by ...

A = P·e^(rt)

where P is the principal invested at interest rate r for t years.

A = $25,000×e^(0.0875·25) ≈ $222,822.57