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Question

Find the amount in the account for the given principal, interest rate, time, and compounding period. P = $1,000, r = 2.8%. t = 5 years; compounded continuously

Solution

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Use the continuously compounded interest formula given by:

A=Pert(1)A=Pe^{rt}\color{white}{\tag{1}}

where:

P=the initial principal investede=the natural baser=annual interest rate, written as a decimalA=the value of the account after t years\begin{align*} P&=\text{the initial principal invested}\\ e&=\text{the natural base}\\ r&=\text{annual interest rate, written as a decimal}\\ A&=\text{the value of the account after $t$ years} \end{align*}

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