Math Continuously Compounded Interest Question?

Question

I have a math problem that I am a little bit stuck on...

If the annual rate of interest is 4.5%, how much money would need to deposited into my savings account the day I was born in order to have the money for all 4 years at a $47,000 college by my 18th birthday?  Calculate time in years and assume that the interest is compounded continuously.

I know the continuously compounded interest formula is A=Pe^(rt), and I have it down to 47,000=Pe^81, but I'm not sure what to do from here.  I'm pretty sure that I'm suppose to take the ln of each side, but I'm not confident.  If someone could help me, I would appreciate it very much.

Thanks!

Anonymous · Accepted Answer

No need to take the log of both sides.  Just divide by e^.81.

But first a correction: (it's .81, not 81 because 4.5% = .045).

$47,000 = Pe^(.81)
P = $47,000 / (e^.81)
P = $47,000 / 2.24790798668
P = $20,908.33

You would need to deposit $20,908.33 into a continuously compound interest account at 4.5% on the day you were born in order for you to have $47,000 on your 18th birthday.

(We're assuming, of course, that college will cost a total of $47,000 over the 4 years, not $47,000 each year)

blandenburg · Answer

ok look your question makes little or no experience yet understand that sara an joe will double their money each 9 years an you get this by making use of dividing 8 into seventy two so if sara is compoundig then you definately ought to assert that

Trending News

Math Continuously Compounded Interest Question?

2 Answers