Question

Finding the final amount in a word problem on continuous compound interest

Answer 1

Continuously compounded interest is computed as follows:

`A=Pe^(rt)`

where

A: final amount

P: principal

r: annual interest rate, as a decimal

t: time, in years

Substituting with P = $1500, r = 0.05 ( = 5/100), and t = 2 years, we get:

`\begin{gathered} A=1500\cdot e^(0.05\cdot2) \\ A=1500\cdot e^(0.1) \\ A=1657.76 \end{gathered}`

After two years she will have $1657.76