Question

Melanie is going to invest $45,000 and leave it in an account for 20 years. Assuming

the interest is compounded continuously, what interest rate, to the nearest
hundredth of a percent, would be required in order for Melanie to end up with
$142,000?

Answer 1

Rate of interest r = 5.20% (Approx.)

Explanation:

Given:

Amount invested p = $45,000

Final amount A = $142,000

Number of year = 20

Find:

Rate of interest r

Computation:

A = p[1+r]ⁿ

142,000 = 45,000[1+r]²⁰

3.1556 = [1+r]²⁰

r = 5.194

Rate of interest r = 5.20% (Approx.)