Rita opened a savings account 5 years ago. The account earns 8% interest, compounded continuously. If the current balance is $3,000.00, how much did she deposit initially?

Question

asked May 27, 2024 209k views

1 Answer

Ramel · Answer 1 · 2024-05-30T22:43:06+0000

Answer:

$2010.96

Explanation:

You want the present value of $3000 if it earns 8% interest compounded continuously for 5 years.

The compound interest formula tells you the future value is ...

FV = PV(e^(rt))

where PV is the present value, r is the interest rate, and t is the number of years.

Solving for PV, we have ...

PV = FV·e^(-rt)

PV = $3000·e^(-0.08·5) = $3000·e^-0.40 ≈ $2010.96

Rita's initial deposit was $2010.96.

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