Certificate Of Deposit Earnings
January 5th, 2008
Question: V=Pe^rt… what does ‘e’ stand for, and how do I do this?
You don’t have to give me the answer if you don’t want to, I’m just wondering how to do it.
From his summer earnings, Nate is saving $500 dollars for a car. If he puts his money into a Certificate Of Deposit at the bank for 5 years, the bank will pay 3.24% interest compounded continuously. The formula for the value, V, of the account with interest compounded continuously is V=Pe^rt [^=exponent], where P is the principal (the original amount of money); r is the annual interest rate; and t is the number of years invested. How much will the account be worth at the end of 5 years?
(1) $220.86 (2) $586.71 (3) $588.22 (4) $2539.21
Thank you so muchh.
Answer: e is a number…
e = 2.71828…….
So you have:
V = 500*e^.0324*5
V = 500*e^.162
V = 500*1.17586
V = 587.93
So after 5 years the account will be worth $587.93
So my answer is closest to answer (3).
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Tags: banking, certificate of deposit earnings, finance, investment, money, rates