Precalculus: Mathematics for Calculus, 7th Edition

Published by Brooks Cole
ISBN 10: 1305071751
ISBN 13: 978-1-30507-175-9

Chapter 4 - Section 4.2 - The Natural Exponential Function - 4.2 Exercises: 2

Answer

In the formula $A(t) = Pe^{rt}$ for continuously compounded interest, the letters P, r, and t, stand for Principal, interest rate per year, and number of years, respectively. So if 100 dollars is invested at an interest rate of 6% compounded continuously, then the amount after two years is $112.75

Work Step by Step

P = Principal, the initial amount invested. R = the interest rate per year offered by a bank, and t is the number of year the principal is stored in the bank. To find the answer to the amount after 2 years if 100 dollars is invested at an interest rate of 6% compounded continuously, use the formula $A(t) = Pe^{rt}$ and plug in 100 for P, .06 for r, and 2 for t: $A(t) = 100e^{.06\times2}$ = 112.75 dollars.
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