Question

You invest $2,600 in an account that

pays an interest rate of 8.25%,
compounded continuously.
Calculate balance of your account after 5 years to the nearest hundredth

Answer 1

$3,927.53

Explanation:

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

`A = Pe^(rt)`

P = principal amount

r = interest rate (decimal)

t = time (years)

First change 8.25% to its decimal form:

8.25% ->
`(8.25)/(100)` -> 0.0825

Next, plug in the values into the equation:

`A=2,600e^(0.0825(5))`

`A=3,927.53`

The balance of the account after 5 years will be $3,927.53