Serge M. answered • 03/21/17

Tutor

5
(11)
Professor of Accounting, retired. Ph.D., CPA

The formula for continuous compounding is Continuous Compounding is

FV = PV*e^rt where e is the constant whose approximate value is 2.71858, r is the interest rate and t is time.

FV = 5,000*e^(.0425*18) = 10,744.97

To have 50,000 after 18 years

50,000 = 5,000 * e^(r*18) and you have to solve for r.

The interest rate would have to be abut 12.8 percent. A financial calculator solves this easily. It is worthwhile having one, but you still have to understand compound interest concepts.