Bill and Gabby deposit 2,000.00 into a savings account which earns 8% interest compounded continuously. They want to use the money in the account to go on a trip in 1 year. How much will they be able to spend?

Solution

B i ll an d G abb y d e p os i t 2, 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 8% 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 1 ye a r . 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 : 2166.57

Solution steps

Translate the problem into an equation:

A = 2000 e^{0.08 \cdot 1}

2000 e^{0.08 \cdot 1} = 2166.57413 \dots

Round to the nearest hundredth:

2166.57

Amount : 2166.57