Answer: he needs to add $277.5
Explanation:
The formula for continuously compounded interest is
A = P x e(r x t)
Where
A represents the future value of the investment after t years.
P represents the present value or initial amount invested
r represents the interest rate
t represents the time in years for which the investment was made.
From the information given,
P = $7,000
r = 5.5% = 5.5/100 = 0.055
t = 4 years
Therefore,
A = 7000 x e(0.055 x 4)
A = 7000 x e(0.22)
A = $8722.5
After four years, he wants to buy a used car for $9,000. Therefore, the additional amount that he needs to add is
9000 - 8722.5 = $277.5