Question

Franco invests 4500 in a account that earns a 3.8% nominal yearly interest rate compounded continuously.If he withdraws the profit from the investment after 5 years, how much has he earned on his investment

Answer 1

Answer: Profit = $941.6

Step-by-step explanation:

The formula for continuously compounded interest is

A = P x e (r x t)

Where

A represents the future value of the investment after t years.

P represents the present value or initial amount invested

r represents the interest rate

t represents the time in years for which the investment was made.

e is the mathematical constant approximated as 2.7183.

From the information given,

P = $4500

r = 3.8% = 3.8/100 = 0.038

t = 5 years

Therefore,

A = 4500 x 2.7183^(0.038 x 5)

A = 4500 x 2.7183^(0.19)

A = $5441.6

the profit from the investment after 5 years is

5441.6 - 4500 = $941.6