Question

Ted invests $8,310 in a savings account with a fixed annual interest rate of 2% compounded continuously. How long will it take for the account balance to reach it take for the account balance to reach $9,751.88?

Answer 1

Answer: It will take 8 years.

Step-by-step explanation:

Equation for interest compounded continuously:

$A=Pe^{rt}$ , A = accumulated amount , P=Principal value , r =rate of interest , t= time.

Given: P=  $8,310 , r = 2%  , A= $9,751.88

$9751.88=8310e^{0.02t}\\\\\Rightarrow\ \dfrac{9751.88}{8310}=e^{0.02t}\\\\\Rightarrow\ 1.17351143201=e^{0.02t}$

Taking natural log on both sides

$\ln (1.17351143201)=\ln (e^{0.02t})\\\\\Rightarrow\ 0.160000478068=0.02t\\\\\Rightarrow\ t=\dfrac{0.160000478068}{0.02}\\\\\Rightarrow\ t=8.0000239034\approx8$

Hence, it will take 8 years.