Question

An investment of P dollars increased to A dollars in t years. If interest was compounded continuously, find the interest rate. (Round your answer to the nearest whole number.)
A = 4482, P = 1000, t = 25

Answer 1

Answer: the interest rate is 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,

A = $4482

P = 1000

t = 25 years

Therefore,

4482 = 1000 x 2.7183^(r x 25)

4482/1000 = 2.7183^25r

4.482 = 2.7183^25r

Taking ln of both sides, it becomes

Ln 4.482 = 25rLn2.7183

1.5 = 25r

r = 1.5/25 = 0.06

r = 0.06 × 100 = 6%