Question

Hannah wants to have $ 7500 to help pay for a new deck in 13 years. If she wants to put her money into an account earning 7% interest compounded continuously, how much should she invest now, so that she will have $ 7500 in 13 years?

Answer 1

$ 3,018.93

Explanation:

This question is asking us to find the Principal.

Hence, the formula for compound interest that is compounded continuously is :

A = Pe^rt

P = Principal/Initial amount

A = Amount after investment = $7500

r = Interest rate = 7% = 0.07

t = time in years = 13 years

Hence,

7500 = Pe^0.07 × 13

P = 7500/e^0.07 × 13

P = 7500/e^0.97

P = $3018.9316803

Approximately P (The amount that should be invested ) = $3,018.93