A high school student deposits a $500 graduation gift in a bank account that pays 4.8% interest compounded continuously. How much will the account be worth after 18 months?
A) $1123.95
B) $1027.22
C) $973.71
D) $1162.71
E) none of these

Question

Quizplus · Accepted Answer

The formula for continuous compounding is $A = P e^{rt}$, where $A$ is the amount of money accumulated after n years, including interest, $P$ is the principal amount (the initial amount of money), $r$ is the annual interest rate (decimal), and $t$ is the time the money is deposited or borrowed for, in years. Here, $P = 500$, $r = 0.048$, and $t = 1.5$ years (18 months). Plugging these values into the formula gives $A = 500 e^{0.048 \times 1.5}$, which calculates to an amount not listed among the options provided.

A High School Student Deposits a $500 Graduation Gift in a Bank