Asked by amber
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?
Answers
Answered by
MathMate
The continuous interest formula is
A=Pe<sup>rt</sup>
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*e<sup>0.12*2</sup>
P=15000/(e<sup>0.24</sup>)
Can you take it from here?
Do a check by the reverse calculation, to see if
P*e<sup>0.24</sup> gives 15000.
A=Pe<sup>rt</sup>
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*e<sup>0.12*2</sup>
P=15000/(e<sup>0.24</sup>)
Can you take it from here?
Do a check by the reverse calculation, to see if
P*e<sup>0.24</sup> gives 15000.
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