Use the continuous compound interest formula to find the indicated value.

Question

Use the continuous compound interest formula to find the indicated value.

A=​$19,798​; P=​$13,500​; t=60 ​months; r=​?

r=______​%

Answer 1

the underlying formula that you want to use on this one is

A = Pe^(rt)

solving for r and plugging in the values that we know then yields

r = ln(A/P) / t

r = ln(19798/13500) / 5

r = 0.38389 / 5 = 0.07658

which in percentage terms here would be 7.658%

Answer 2

19798= 13500(e^60t)

19798/13500= e^60r Take natural log of both sides

ln(19798/13500) =ln(e^60r)

ln(19798/13500) = 60r

r=ln(19798/13500)/60

r=.00638 = .638%