Nate and Allie deposit 1,000.00 into a savings account which earns 6% interest compounded continuously. They want to use the money in the account to go on a trip in 3 years. How much will they be able to spend?

Solution

N a t e an d A ll i e d e p os i t 1, 000.00 in t o a s a v in g s a cco u n t w hi c h e a r n s 6% in t eres t co m p o u n d e d co n t in u o u s l y . T h ey w an t t o u se t h e m o n ey in t h e a cco u n t t o g o o n a t r i p in 3 ye a rs . Ho w m u c h w i ll t h ey b e ab l e t o s p e n d ?

Amount : 1197.22

Solution steps

Translate the problem into an equation:

A = 1000 e^{0.06 \cdot 3}

1000 e^{0.06 \cdot 3} = 1197.21736 \dots

Round to the nearest hundredth:

1197.22

Amount : 1197.22