Solve the problem.
-A bank offers a certificate of deposit that earns 4.5% interest compounded continuously. How much will a $4,000 investment be worth in 10 years? Round to the nearest cent as needed.
A) $4,200.00
B) $4,180.00
C) $6,273.25
D) $5,967.30

Question

Quizplus · Accepted Answer

The formula for continuous compounding is A=Pe^(rt) where A is the final amount, P is the principal (initial investment), e is the mathematical constant approximately equal to 2.71828, r is the interest rate (in decimal form), and t is the time in years. Plugging in the values, we get A=4000*e^(0.045*10)=6273.25. Therefore, the investment will be worth $6,273.25 in 10 years. The answer is C. The formula for continuously compounded interest is A = Pe^(rt), where A is the amount in the account, P is the principal (initial investment), e is the mathematical constant approximately equal to 2.71828, r is the annual interest rate as a decimal, and t is the time in years. Plugging in the given values, we get A = 4000*e^(0.045*10) = $6,273.25. Therefore, the best choice is C.

Solve the Problem. -A Bank Offers a Certificate of Deposit That Earns 4.5