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Popular Word Problems >

Addison is going to invest in an account paying an interest rate of 6% compounded continuously. How much would Addison need to invest, to the nearest ten dollars, for the value of the account to reach 94,000 in 5 years?

Solution

A dd i so n 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 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 dd i so n n ee d t o in v es t, t o t h e n e a res t t e n d o ll a rs, 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 94, 000 in 5 ye a rs ?

Solution

Principal : 69636.91

Solution steps

Translate the problem into an equation:

94000 = P e^{0.06 \cdot 5}

Solve for

P, 94000 = P e^{0.06 \cdot 5} : P = 69636.91

Principal : 69636.91

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