Question

You deposit $10,000 in a bank and plan to keep it there for five years. The bank pays 8% annual interest compounded continuously. Calculate the future value at the end of five years.
a. $14,693.
b. $15,000.
c. $14,918.
d. $14,500.

Answer 1

Answer:

c. $14,918

Step-by-step explanation:

You are going to want to use the continuous compound interest formula, which is shown below.

$A = Pe^{rt}$

A = total

P = principal amount

r = interest rate (decimal)

t = time (years)

First, change 8% into a decimal:

8% -> $\frac{8}{100}$ -> 0.08

Now, plug in the values:

$A=10,000e^{0.08(5)}$

$A=14,918.25$

Your answer is c. $14,918