Suppose that $1200 is initially invested in an account at a fixed interest rate, compounded continuously. Suppose also that, after five years, the amount of money in the account is $1360 . Find the interest rate per year?

Write your answer as a percentage.

Question

Suppose that $1200 is initially invested in an account at a fixed interest rate, compounded continuously. Suppose also that, after five years, the amount of money in the account is $1360  . Find the interest rate per year?

Write your answer as a percentage.

anonymous · Answer

Formula for continuously compounded interest:
Amount = Pe^(rt)
Plug everything in...
1360 = 1200e^(r*5)
Divide by 1200.
1.13333333 = (e^5r)
Natural log of both sides.
5r = 0.12516314
Divide by 5.
r = 0.025032628
Number would look pretty clean at 2.5% so I'm plug it in and see if that fixes rounding errors.

Amount = Pe^(rt)
1360 = 1200e^(5*0.025)
1360 approx = 1 359.77814

It didn't. So, the rate is approximately 2.5032628%

anonymous · Answer

thank u all

anonymous · Answer

@campbell_st That isn't compounded continuously.