Question

Rochelle deposits $5,000 in an IRA. What will be the value of her investment in 25 years if the investment is earning 8% per year and is compounded continuously? Round to the nearest cent.

Answer 1

Answer:

$\ 36,945.28$  

Step-by-step explanation:

we know that

The formula to calculate continuously compounded interest is equal to

$A=P(e)^{rt}$  

where  

A is the Final Investment Value  

P is the Principal amount of money to be invested  

r is the rate of interest in decimal  

t is Number of Time Periods  

e is the mathematical constant number

we have  

$t=25\ years\\ P=\ 5,000\\ r=8\%=8/100=0.08$

substitute the values in the formula

$A=5,000(e)^{0.08*25}$  

$A=5,000(e)^{2}$  

$A=\ 36,945.28$