Question

2. You invest $4000 in an account for college. It pays 4.5% compounded continuously. What will be the value after 6 years? Use the equation A= Peart Show your work.

Answer 1

We are given the following information

Deposited amount = $4000

Interest rate = 4.5% = 0.045

Number of years = t = 6

Compounding = continuously

We can use the following formula for continuous compounding

$A=P\cdot e^{r\cdot t}$

Let us substitute the given values

$\begin{gathered} A=P\cdot e^{r\cdot t} \\ A=4000\cdot e^{0.045\cdot6} \\ A=4000\cdot e^{0.27} \\ A=4000\cdot1.3099 \\ A=\ 5239.6 \end{gathered}$

Therefore, the value after 6 years will be $5239.6