QQuestionAccounting
QuestionAccounting
How much money invested at 6% compounded continuously for 5 years will result in $916?
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Answer
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Step 1:I'll solve this problem step by step using continuous compound interest formula:
Step 2:: Identify the Continuous Compound Interest Formula
- $$t$$ = Time in years
The formula for continuous compound interest is: Where:
Step 3:: Plug in Known Values
- $$t = 5$$ years
- r = 0.06 (6% written as decimal)
Step 4:: Rearrange Formula to Solve for Principal
P = \frac{A}{e^{rt}}
Step 5:: Calculate
P = 678.50
P = \frac{916}{e^{0.30}}
Final Answer
$678.50 must be invested at 6% compounded continuously to result in $916 after 5 years.
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