We are going to put 2500 into an account that earns interest

We are going to put $2500 into an account that earns interest at a rate of 12%. If we w ant to have $4000 in the account when we close it how long should we keep the money in the account if, we compound interest continuously. We compound interest 6 times a year.

Solution

For compounded interest continuously , the formula of amount is

A= Pe^rt

Where A= amount, P=Principal, r= rate of interest and t=time period

Here Amount ,A= $4000, Principal,P=$2500, Rate of interest,r=12%

Substituting these values in the formula

4000=2500e^0.12t

Dividing both sides by 2500

4000/2500=2500e^0.12t/2500

1.6= e^0.12t

Taking Ln on both sides

Ln 1.6=Ln e^0.12t

.47=0.12t

Dividing both sides by 0.12

.47/0.12=0.12t/0.12

3.92=t

Or time,t=3.92