If you were to place $2,500 in a savings account that pays 3% interest compounded continuously, how much money will you have after 5 years? Assume you make no other deposits or withdrawals.

A. $2,904.59
B. $2,898.19
C. $431,078.73
D. $2,515.00

Question

If you were to place $2,500 in a savings account that pays 3% interest compounded continuously, how much money will you have after 5 years? Assume you make no other deposits or withdrawals.

A. $2,904.59
B. $2,898.19
C. $431,078.73
D. $2,515.00

anonymous · Answer

@kc_kennylau @ranga do either of you know what type of formula I would use for this kind of question?

ranga · Answer

A = Pe^(rt)

anonymous · Answer

what do those terms stand for?

ranga · Answer

$$\Large A = Pe^{rt}$$

anonymous · Answer

I dont understand what numbers I would plug into which letters

ranga · Answer

A is the maturity amount
P is the Principal
r is the annual interest rate in decimals
t is the time in years

anonymous · Answer

so it should be 2500=.03^5?

ranga · Answer

P = 2500 ; r = 0.03 ; t = 5   Find A.

anonymous · Answer

would it be 2500=x^.03(5) then?

ranga · Answer

A is NOT 2500
P is 2500
Find A

anonymous · Answer

x=2500^.03*5 ?

ranga · Answer

$$\Large A = 2500 \times e^{.03 * 5} = 2500 \times e^.15 = ?$$

anonymous · Answer

if that is correct then I got 3.23, if that formula isnt correct then I have no idea

ranga · Answer

you left out "e" in all your equations.

anonymous · Answer

NO! yes I just redid it & got 2904.59

ranga · Answer

yes.

anonymous · Answer

thank you SO much, you're such a great help! good night :)

ranga · Answer

you are welcome ali.