Precalculus (10th Edition)

Published by Pearson
ISBN 10: 0-32197-907-9
ISBN 13: 978-0-32197-907-0

Chapter 5 - Exponential and Logarithmic Functions - 5.7 Financial Models - 5.7 Assess Your Understanding - Page 321: 14



Work Step by Step

According to the Formula for compounding continuously, where $P$ is the principal, the amount deposited, $r$ is the annual interest rate, $t$ is the number of years, $A$ is the amount you get back after $t$ years: $A=P\cdot e^{r\cdot t}$ Here we have: $t=3\text{ years}$ $r=7\%=0.07$ $P=\$400$ Substitute these values into the formula above to obtain: $A=\$400\cdot e^{0.07\cdot 3}\approx\$493.47$
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