P = Po e^rt
3000 = 2600 e^12r
1.154 = e^12r
ln 1.154 = 12 r
.1431 = 12 r
r = .012
= 1.2 %
How would you set this problem up..I know to use A=Pe^rt
Larry has $2600 to invest and needs $3000 in 12 years. What annual rate of return wll he need to get in order to accomplish his goal, if interest is compounded continuously?
2 answers
I assumed you knew the recipe for continuous compounding. You can get it as follows:
change in P = dP = P * r * change in T = r dt
dP/P = r dt
ln P = r t
integrate
P = c e^rt
when t = 0, P = Po
P = Po e^rt
change in P = dP = P * r * change in T = r dt
dP/P = r dt
ln P = r t
integrate
P = c e^rt
when t = 0, P = Po
P = Po e^rt
1 answer