Question

Jeremy is investing $47,000 in an account paying 9.26% interest compounded

continuously.
What will Jeremy's account balance be in 42 years?

Answer 1

$2,296,973.35

Explanation:

This is a time value of money question

Since it's asking for the balance in 42 years, that's a time in the future and therefore you use a Future value formula.

Note: it is important to note that it's continuous compounding

FV = PV
`e^(rt)`

"e" in the formula is an exponential

PV= 47,000

r = 9.26% or 0.0926

t = 42 years

Therefore,

`FV = 47,000e^(0.0926*42) \\ \\ FV =47,000 * 48.871773`

FV = 2,296,973.353

Therefore, the balance in the account will be $2,296,973.35