Exponential Function

Question

On the day of a child’s birth, a deposit of $25,000 is made in a trust fund that pays 8.75% interest compounded continuously. Determine the balance in this account 25 years later.

Answer 1

To do this use the formula for continuous growth y = A x e^kt where A is initial amount invested (25,000) k is the growth factor (.0875) and t is time

y = 25000 x e^(.0875 x25)

y = 25000 x e^2.1875= $222,822.57