QQuestionMathematics
QuestionMathematics
# How much would $\$ 500$ invested at 5\% interest compounded continuously be worth after 8 years? Round your answer to the nearest cent.
A(t)=P e^{r t}
where:
- $P= 500$
- $r= 0.05$
- $t= 8$
Calculate $A(t)$.
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Answer
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Step 1:: Identify the given values and the formula to use.
A(t) = P e^{rt}
We are given the principal amount P = $500, the interest rate r = 0.05 (as a decimal), and the time t = 8 years. The formula to use is the continuous compounding interest formula:
Step 2:: Plug the given values into the formula.
A(8) = 500 \times e^{0.05 \times 8}
Step 3:: Calculate the value of the expression.
A(8) = 500 \times e^{0.4}
Using a calculator, we find that e^0.4 ≈ 1.4918246976.
Step 4:: Multiply the principal amount by the calculated value.
A(8) = 500 \times 1.4918246976
Step 5:: Calculate the final amount.
A(8) \approx 745.91
Final Answer
After 8 years, $\$1$ invested at 5% interest compounded continuously will be worth approximately $\$745.1$.
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