Mr. and Mrs. Turner hope to send their daughter to college in thirteen years. How much money should they invest now at an interest rate of 8% per year, compounded continuously, in order to be able to contribute 9000 to her education?

Solution

M r . an d M rs . T u r n er h o p e t o se n d t h e i r d a ug h t er t o co ll e g e in t hi r t ee n ye a rs . Ho w m u c h m o n ey s h o u l d t h ey in v es t n o w a t an in t eres t r a t e o f 8% p er ye a r, co m p o u n d e d co n t in u o u s l y, in or d er t o b e ab l e t o co n t r ib u t e 9000 t o h er e d u c a t i o n ?

Principal : 3181.09

Solution steps

Translate the problem into an equation:

9000 = P e^{0.08 \cdot 13}

Solve for

P, 9000 = P e^{0.08 \cdot 13} : P = 3181.09

Principal : 3181.09