Question

Alex plans to invest $5,000 for 8 years at State Bank that offers an annual rate of 4.8% compounded continuously. How much interest is earned by the end of the 8 years?

Choices:

A: $8,213.00

B: $5,000.00

C: $7,340.73

D: $2,340.73

Answer 1

D. $2,340.73

Explanation:

You are going to want to use the continuous compound interest formula, which is shown below.

`A = Pe^(rt)`

A = total

P = principal amount

r = interest rate (decimal)

t = time (years)

Now lets plug in the values into the equation.

`5,000e^(0.048(8))` = $7,340.73

This is our total. To find the interest earned, simply subtract $5,000 from $7,340.73 as shown below:

$7,340.73 - $5,000 = $2,340.73

The answer is D. $2,340.73