Suppose an investment of 12000 is invested at an annual rate

Suppose an investment of $12,000 is invested at an annual rate of 7.9%, compounded continuously. What is the average rate of change of the investment between years 7 and 17? Round your answer to the nearest cent/penny.

Answer = dollars per year. (Round to two decimal places)

Solution

The formula for continuous compounding is A = Pe^rt , where P is the initial investment, r is the rate of interest in decimals , t is the time period in years and A is the future value.

Thus, the average rate of change of the value of investment between years 7 and 17 is (45966.21-20861.53)/(17-7) =25104.68/10 = $ 2510.47 per year ( on rounding off to two decimal places).