Question

If $125 is invested at an interest rate of 18% per year and is compounded continuously, how much will the investment be worth in 2 years? Use the continuous compound interest formula A = Pert. $122 $162 $179 $457.

Answer 1

The correct statement is that if an amount of $125 is invested for compounded interest of 18%, then such amount will become $179 in 2 years. So, the correct option is C.

The calculation of compound interest can be done by using the formula for compounded annuity and assuming that the amount is compounded daily.

Calculation of Compounded Annuity

The formula for calculation of compounded annuity is as follows,

$\rm Compounded\ Annuity = P(1+ \dfrac{r}{100})^n^t$

Now putting the given values in the formula above, we get,

$\rm Compounded\ Annuity = 125(1+0.18)^3^6^5^x ^2\\\\\rm Compounded\ Annuity =125\ x\ 1.432\\\\\rm Compounded\ Annuity = \ 179.15$

So, the value of the annuity becomes $179.15 in two years.

Hence, the correct option is C that the amount of $125 is invested for compounded interest of 18%, then such amount will become $179 in 2 years.

Learn more about Compound Annuity here:

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