Ashley is going to invest in an account paying an interest rate of 5.6% compounded continuously. How much would Ashley need to invest, to the nearest dollar, for the value of the account to reach 2,080 in 16 years?

Solution

A s h l ey i s g o in g t o in v es t in an a cco u n t p a y in g an in t eres t r a t e o f 5.6% co m p o u n d e d co n t in u o u s l y . Ho w m u c h w o u l d A s h l ey n ee d t o in v es t, t o t h e n e a res t d o ll a r, f or t h e v a l u e o f t h e a cco u n t t o re a c h 2, 080 in 16 ye a rs ?

Principal : 849.05

Solution steps

Translate the problem into an equation:

2080 = P e^{0.056 \cdot 16}

Solve for

P, 2080 = P e^{0.056 \cdot 16} : P = 849.05

Principal : 849.05