Question

A certain loan program offers an interest rate of 4%, compounded continuously. Assuming no payments are made, how much would be owed after six yearson a loan of I300Do not round any intermediate computations, and round your answer to the nearest cent

Answer 1

In order to calculate how much will be owed, we can use the formula below for interest compounded continuously:

$A=P\cdot e^{rt}$

Where A is the final amount after t years, P is the initial amount and r is the interest rate.

So, using P = 1300, r = 0.04 and t = 6, we have:

$\begin{gathered} A=1300\cdot e^{0.04\cdot6}\\ \\ A=1300\cdot e^{0.24}\\ \\ A=1652.62 \end{gathered}$

Therefore the amount owed after 6 years is $1652.62.