Continuous Compounding Problem

Question

How do I solve this?

You lend $100 at 10% continuous interest. If you are repaid 2 months later, what is owed?

Answer 1

The formula for continuous compounding is A(t) = Pe^rt, where P is principal, r is the annual rate, t is the number of years, and A(t) is the future value.

Since 2 months is ¹/₆ of a year, it would be 100e^{0.1 • 1/6} ≈ 101.68.