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 322: 52

Answer

The first option is better.

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: $t=3\text{ years}$ $r=10\%=0.1$ $P=\$1000$ Substitute these values into the formula above to obtain: $A=1000\cdot e^{0.1\cdot 3}\approx \$1349.8$, which is more than $1325 \$$, hence the first option is better.
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.