Question

Rachael invests $1,000 in a bank account that pays 5% interest. How much money do will she have in 10 years if the interest is compounded continuously?

Answer 1

Use the formula for continuous compounding:

A = Pe^(rt), where P is the principal amount, r is the annual interest rate expressed as a decimal fraction, and t is the number of years.

Then A = $1000e^(0.05*10) = $1000e^0.50 = $1648.72.