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ALGEBRA 1

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Cindy will require $15,000 in 2 years to return to college to get an MBA degree. How much money should she ask her parents for now so that, if she invests it at 12% compounded continuously, she will have enough for school?

  • ALGEBRA 1 -

    The continuous interest formula is
    A=Pert
    A=future amount, 15000
    P=principal (unknown)
    e=euler's constant, 2.71828..
    r=rate of interest, 0.12 for 12%
    t=time in years (for annual rate of interest), 2 years

    So
    15000=P*e0.12*2
    P=15000/(e0.24)

    Can you take it from here?

    Do a check by the reverse calculation, to see if
    P*e0.24 gives 15000.

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