10.1: ​Recently, a certain bank offered a 10​-year CD that earns 14.15​% compounded continuously. ​(a) If $50,000 is invested in this​ CD, how much will it be worth in 10 ​years?

Question

​Recently, a certain bank offered a 10​-year CD that earns 14.15​% compounded continuously.

​(a) If $50,000 is invested in this​ CD, how much will it be worth in 10 ​years?

approximately ​$________ ​(Round to the nearest​ cent.)

Answer 1

Normally, we would use formula: A= P (1 + r/n) ^nt where A is the Amount, P is the Initial Investment, R is the rate, N is the units of time, and T is the amount of time.

However, this question is asking about a rate that is "compounded continuously." Likely, you should use formula: A = Pe^rt, where A is the Amount, P is the initial investment, R is the rate, and T is the amount of time.

Remember that E = 2.71828

A= 50,000e^{(.1415 *10)}

A = $ 205,824.32

Just FYI, CD investments are not typically 14.15%. This is an extremely high interest rate, especially when compounded continuously.