Question

Daniel deposits $8,000 into a continuously compounding interest account. After 18 years there is $13,006.40 in the account. What was the interest rate?

Answer 1

r = 2.7%

Explanation:

Interest rate compounded continuously

r = ln(A/P) / t

Where,

r = interest rate

A = future value

P = principal

t = time

r = ln(A/P) / t

r = ln(13,006.40/8,000) / 18

= ln(1.6258) / 18

= 0.4860000023303 / 18

= 0.0270000001294

Approximately

r = 0.027

Convert value of r to percentage

r = 0.27 × 100

r = 2.7%