Question

Hector invests $20,000 at age 21. He hopes the investment will be worth $200,000 when he turns 40. If the interest compounds continuously, approximately what rate of growth will he need to achieve his goal? Round to the nearest tenth of a percent.

Answer 1

12.1%

Explanation:

Answer 2

12.12%

Explanation:

We have that the formula is given by:

A = p * e ^ (r * t)

From here, we know that A = 200000; p = 20000 and the time we can calculate 40 - 21 = 19

if we replace we have:

200000 = 20000 * e ^ (19 * r)

we must calculate r:

e ^ (19 * r) = 200000/20000

e ^ (19 * r) = 10

19 * r = ln 10

r = ln 10/19

r = 0.1212

In other words, the rate of growth is 12.12%