A person places 398 in an investment account earning an annual rate of 9.7%, compounded continuously. where V is the value of the account in t years, P is the principal initially invested, e is the base of a natural logarithm, and r is the rate of interest, determine the amount of money, to the nearest cent, in the account after 7 years.

Solution

A p erso n pl a ces 398 in an in v es t m e n t a cco u n t e a r nin g an ann u a l r a t e o f 9.7%, co m p o u n d e d co n t in u o u s l y . w h ere V i s t h e v a l u e o f t h e a cco u n t in t ye a rs, P i s t h e p r in c i p a l ini t ia ll y in v es t e d, e i s t h e ba se o f a na t u r a l l o g a r i t hm, an d r i s t h e r a t e o f in t eres t, d e t er min e t h e am o u n t o f m o n ey, t o t h e n e a res t ce n t, in t h e a cco u n t a f t er 7 ye a rs .

Amount : 784.82

Solution steps

Translate the problem into an equation:

A = 398 e^{0.097 \cdot 7}

398 e^{0.097 \cdot 7} = 784.81812 \dots

Round to the nearest hundredth:

784.82

Amount : 784.82