Interest Compounded Continuously

Question

You unexpectedly earned an extra $4500, and you are deciding whether to save it or to spend it. What is the future value in ten years of that $4500 if you decide to invest it in a CD that is paying 2.5% interest, compounded continuously?

Answer 1

The formula for continuous compounding is A = Pe^rt, where A is the future value, P is the principal (initial investment), r is the annual rate (as a decimal), and t is the number of years. So it is then a simple matter of plugging the values into the formula:

4500e^0.025*10 = 5778.11