Ernest and Janet deposit 7,000.00 into a savings account which earns 12% 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

E r n es t an d J an e t d e p os i t 7, 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 12% 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 : 10033.31

Solution steps

Translate the problem into an equation:

A = 7000 e^{0.12 \cdot 3}

7000 e^{0.12 \cdot 3} = 10033.30590 \dots

Round to the nearest hundredth:

10033.31

Amount : 10033.31