Question

Diego deposited a certain sum of money in a bank 4 years ago. If the bank had been paying interest at the rate of 6% compounded continuously and he has $13,000 on deposit today, what was his initial deposit?

Answer 1

Answer:

$10,226.16

Explanation:

The equation that describes the future value (F) of an initial value (P), compounded continuously at a rate 'r' for a period of 'n' years is:

$F=P*e^{rn}$

If the value after 4 years at a rate of 6% is $13,000, the initial deposit is:

$13,000=P*e^{0.06*4}\\P=\ 10,226.16$

His initial deposit was $10,226.16.