The Deposit Check
Hannah opened a savings account and deposited $300.00. The account earns 4% interest, compounded continuously. If she wants to use the money to buy a new bicycle in 3 years, how much will she be able to spend on the bike? Use the formula A=Pe^rt, where A is the balance (final amount), P is the principal (starting amount), e is the base of natural logarithms (≈2.71828), r is the interest rate expressed as a decimal, and t is the time in years. Round your answer to the nearest cent.
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1 solution
Continuously compounded interest:
A=Pe^rt The variables in the equation are A, P, r, and t. The letter e is a constant.
-A is the balance (final amount).
-P is the principal (starting amount).
-e is the base of natural logarithms.
-r is the interest rate expressed as a decimal.
-t is the time in years. You want to find the balance, A. First, list the other variables in the equation A=Pe^rt and specify their given values. P=$300.00 r=4%=0.04 t=3 years
Now plug these values into the equation and solve for A A = Pert = 300e^0.04*3 Plug in P=300, r=0.04, and t=3 = 300e^0.12 ≈ 338.24905547 ≈ $338.25 Round to the nearest cent
To the nearest cent, Hannah will be able to spend $338.25. Got it!!! GREAT
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