Question

You deposit $2500 in an account that pays 12% annual interest rate compounded continuously. Find the balance after 5 years.

Answer 1

$4,555

Explanation:

According to the scenario, calculation of the given data are as follows,

Total deposit (P) = $2,500

Annual interest (r) = 12%

Time period (t) = 5 years

We can calculate the balance after 5 years if compounded continuously by using following formula,

FV = P
`e^(rt)`

By putting the value, we get

FV = $2,500 ×
`e^((0.12 * 5))`

= $2,500 ×
`e^(.60)`

= $2,500 × 1.822

= $4,555