Ivan earned some money doing odd jobs last summer and put it in a savings account that earns 7% interest compounded continuously. After 1 year, there is 600.00 in the account. How much did Ivan earn doing odd jobs?

Solution

I v an e a r n e d so m e m o n ey d o in g o dd j o b s l a s t s u mm er an d p u t i t in a s a v in g s a cco u n t t ha t e a r n s 7% in t eres t co m p o u n d e d co n t in u o u s l y . A f t er 1 ye a r, t h ere i s 600.00 in t h e a cco u n t . Ho w m u c h d i d I v an e a r n d o in g o dd j o b s ?

Principal : 559.44

Solution steps

Translate the problem into an equation:

600 = P e^{0.07 \cdot 1}

Solve for

P, 600 = P e^{0.07 \cdot 1} : P = 559.44

Principal : 559.44