Question

An investment banker deposited $50,000 in an account earning a nominal 6% per year compounded continuously. How much was in the account at the end of three years

Answer 1

The amount in the account at the end of three years will be $59,861.

Explanation:

The formula to compute the amount at the end of t years, compounded continuously is:

`A=P* e^(t* i)`

Here,

A = Amount at the end

P = Principal amount

i = interest rate

t = number of years.

It is provided that:

P = $50,000

i = 6%

t = 3 years

Compute the amount in the account at the end of three years as follows:

`A=P* e^(t* i)`

`=50000* e^((3* 0.06))\\=50000* 1.19722\\=59861`

Thus, the amount in the account at the end of three years will be $59,861.