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26. If you find a CD offering 4.2% interest compounded continuously, how much should you deposit if you are saving up to refinish your kitchen in 5 years and you estimate that will take 13,300?$

26. If you find a CD offering 4.2% interest compounded continuously, how much should-example-1

1 Answer

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The formula for determining compound interest that is compounded continuously is expressed as

A = Pe^rt

where

A is the amount after t years

P is the principal or initial amount

r is the interest rate

t is the duration in years

e is exponent

From the information given,

A = 13300

r = 4.2/100 = 0.042

t = 5

Thus, we have

13300 = Pe^(0.042 x 5)

13300 = 1.23368P

P = 13300/1.23368

P = 10780.75

The amount to be deposited is $10780.75

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