Question

You are investing P dollars at an annual interest rate of r, compounded continuously, for t years. Which of the following would result in the highest value of the investment? Explain your reasoning. Double your interest rate.

Solution

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Answered 1 year ago
Answered 1 year ago
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For continuous compounding, the balance in the account has the formula:

A=PertA=Pe^{rt}

where AA is the account balance, PP is the deposited/invested amount, rr is the rate of interest, and tt is the time in years.

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