Question

A certain loan program offers an interest rate of 3%, compounded continuously. Assuming no payments are made, how much would be owed after seven years on a loan of $3100?Round your answer to the nearest cent.

Answer 1

The amount that would be owed after seven years is $3824.40

EXPLANATION

Given:

Principal(P)= 3100

rate (r) =0.03

Time (t) = 7

Using the formula below (since it is continuously compounded):

$A=Pe^{rt}$

Substitute the values into the formula and evaluate.

$=3100\times e^{0.03\times7}$$=3100\times e^{0.21}$

$\approx3824.40$

Hence, the amount that will be owed is $3824.40