Question

I need help with the whole problem!

Answer 1

Okay so these problems seem a bit confusing to most so I will give my explanation as best as I can.

The Formula for this is A = P(e)^rt

This is A = Principal Value * Constant e to the power of rate times time.

The principal is easy to find.  It is what he put in ($10,000).

P = 10,000

So, first we need to find the rate.  The rate of 2.3% is the same as saying 0.023.  If you want a good way to convert it, 1.00 is equal to 100% and 0.01 is equal to 1%.  Thus, 0.023 would be 2.3% (also note that sometimes in other equations it will be represented by adding 1 to the 0.023 but for now, you can ignore this)

r = 0.023

Then, we know that compound is continuous and that is why we use e which can be found on any calculator.  Its kinda tough to explain why its e but later on in math, you may get to it.  It will just confuse things more if you know the reasoning.  For now, continuous = e.

So we are trying to find out the worth within ten years so:

t = 10

Plug all the numbers in and you will get A = $12586.

The answer is $12,586