Word problem with money

Question

Calculate the amount of money in a bank account if $2000 is deposited for 15 years at an interest rate of

(a) 5% annually

(b) 5% continuously per year

Answer 1

Hi! Amount of money is calculated as either *P = P0(1.0 + (rate))^t for interest compounded annually, or *P = P0 e^[(rate)*t] with P0 = $2000 (rate) = 0.05, for five percent per year t = 15 years For part a), this is P = $2000(1.05)^15 = $4157.86 For part b), this is P = $2000 * e^[(0.05)*15] = $4234.00