You deposited 10000 in a savings account five years ago The

You deposited $10,000 in a savings account five years ago. The account has earned 5.25% interest compounded continuously since then. How much money is in the account today? 1.$12,800 2.$12,900 3.$13,000 4.$13,600

Solution

For contnous compounding the formula is A= Pe^rt. where A is the amount, P is the Principal, r is the rate of interest and t is the time.

Here P= 10,000, t= 5yeras and r= 5.25% 0r, 0.0525

Accordingly A= 10000 e ^(.0525)5 = 10000e^0.2625

= 10000(1.30017)= 13001.7

This figure is nearest to the option at #3. Hence correct answer would be $13000.

( the difference arises because of the value of e being taken up for calculations)

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