You invest $5500 into a 4.5% an year CD. If interest is compounded continuously, how much money will you have after 5 years?
I know the formula.
Take a look at the ones I started for you, and take a stab at the other, eh?
A = P * e^(rt) = 5500 * (2.71828^(.045*5)) = 6887.77
To find out how much money you will have after 5 years with a continuously compounded interest rate, we can use the formula for continuous compound interest:
A = P * e^(rt)
Where:
A = the final amount of money
P = the initial principal (your investment)
e = the mathematical constant approximately equal to 2.71828
r = the annual interest rate (expressed as a decimal)
t = the time period in years
Given:
P = $5500 (the initial investment)
r = 4.5% = 0.045 (converted to decimal form)
t = 5 years
Now, let's calculate the final amount (A):
A = 5500 * e^(0.045 * 5)
To find the value of e raised to the power of (0.045 * 5), you can use a scientific calculator or an online calculator. The result is approximately 1.2334.
A = 5500 * 1.2334
A ≈ $6783.70
Therefore, after 5 years, you would have approximately $6783.70 in your investment if the interest is continuously compounded.