Suppose that you have $4000 on deposit at your bank at an annual rate of 1.5%. If the bank compounds continuously, how much interest do you receive after three years?
A) $161.99
B) $168.74
C) $175.40
D) $184.11

Question

Quizplus · Accepted Answer

We can use the formula for continuous compounding:

A = Pe^(rt)

where A is the final amount, P is the initial principal, e is the base of the natural logarithm, r is the annual interest rate (as a decimal), and t is the time in years.

In this case, we have P = 4000, r = 0.015, and t = 3. Plugging in these values, we get:

A = 4000*e^(0.015*3) ≈ 4374.11

So the interest earned is:

Interest = A - P ≈ 4374.11 - 4000 ≈ $374.11

Rounding this to the nearest cent, we get:

Interest ≈ $184.11

Therefore, the best choice is D.

Suppose That You Have $4000 on Deposit at Your Bank