You borrow $5000 for your tuition from a bank that demands 4% annual interest compounded continuously. How much do you owe the bank after four years?

Answer 1

Greetings! Lets solve this shall we ?

So, we must find out how must money is owed after 4 years! Since we are compounding continuously over the course of 4 years, we use the continuous compounding formula of

A = Pe^rt such that r = 0.04, t = 4 and P = 5000.............Then, we plug everything in to get

A = 5000e^(0.04)(4)

A = 5000e^0.16

A = $5867.55

This can be found by putting it into a calculator.

I hope this helped!