Problem 1
If you invest $1,000 at an annual interest rate of 5% compounded continuously, calculate the final amount you will have in the account after five years.
To calculate continuously compounded interest use the formula below. In the formula, A represents the final amount in the account that starts with an initial (principal) P using interest rate r for t years. This formula makes use of the mathemetical constant e .
Continuously Compounded Interest is a great thing when you are earning it! Continuously compounded interest means that your principal is constantly earning interest and the interest keeps earning on the interest earned!
Practice Problems
Problem 2
If you invest $500 at an annual interest rate of 10% compounded continuously, calculate the final amount you will have in the account after five years.
Problem 3
If you invest $2,000 at an annual interest rate of 13% compounded continuously, calculate the final amount you will have in the account after 20 years.
Problem 4
If you invest $20,000 at an annual interest rate of 1% compounded continuously, calculate the final amount you will have in the account after 20 years.
