If $1360 is invested in an account earning 4% annual interest compounded continuously, then how much interest is accrued in the first 2 years?

Question

homework questions i am confused on

Answer 1

Hey Alexis, let's figure this out.

 

Use the formula for continuous interest A = Pe^rt, where:

 

A = ending amount

P = starting amount = 1,360

e  is a constant ≈ 2.718

r = rate as a decimal = .04

t = time in years = 2

 

A=1360e^((.04)(2))

A ≈ 1,473.27

 

The difference between your ending amount and starting amount is the amount of interest earned.

 

Interest = $1,473.27 - $1,360.00 = $173.27

 

Hope this helps!