4 If the nominal interest rate is 3 how much is 5000 worth i

4. If the nominal interest rate is 3%, how much is $5000 worth in 10 years in a continuously compounded account? A) $3180 B) $4490 C) $5420 D) $6750

Solution

Principal (P) = $5,000

Nominal interest rate (r) = 3% or 0.03

Time (t) = 10 years

Calculate the amount -

A = Pe^rt

A = $5,000 * e^(0.03*10)

A = $5,000 * e^0.3

A = $5,000 * 1.3498

A = $6,750

Hence, the correct answer is the option (D).