Question

Suzy has $2000 to invest and needs $2400 in 12 years. What annualrate of return will she need to get in order to accomplish her goal, if theinterest is compounded continuously? (Round your answer to twodecimal places) A = Pert

Answer 1

Given data:

Principal Amount=$2000.

Final Amount=$2400

Time period(t)=12 years

Let the rate of return be r.

As per formula of continous compunding:

`\begin{gathered} \text{Final amount=Principal}(e^(rt)) \\ 2400=2000(e^(12r)) \\ e^(12r)=(2400)/(2000) \\ e^(12r)=1.2 \\ 12r=\ln (1.2) \\ 12r=0.1823 \\ r=0.01519 \end{gathered}`

Thus, the rate of interest required is 1.519%.