Rock Solid Bank & Trust is offering a CD that pays 5% compounded continuously. How much interest would a $1,000 deposit earn over 12 years (Round your answer to the nearest dollar.)
Select the correct answer.

A)$2,822
B) $822
C) $1,822
D) $1,820
E) $1,796

Question

Rock Solid Bank & Trust is offering a CD that pays 5% compounded continuously. How much interest would a $1,000 deposit earn over 12 years  (Round your answer to the nearest dollar.)  
Select the correct answer.
 
A)$2,822
B) $822
C) $1,822
D) $1,820
E) $1,796

Quizplus · Accepted Answer

The formula to find the amount of interest earned over time with continuous compounding is A=Pe^(rt), where P is the principal, r is the interest rate, t is the time in years, and e is the constant 2.71828. Plugging in the given values, we get A=1000e^(0.05*12). Solving for A, we get approximately $1834.67. Subtracting the principal, we get the interest earned: $1834.67 - $1000 = $834.67, which rounds to $822 to the nearest dollar. Therefore, the correct answer is B) $822.

Rock Solid Bank & Trust Is Offering a CD That