Question

3. Matt invested $5,500 into an account earning 2.5% APR compounded continuously. What will his balance be after seven years?

4. How much money should be deposited in an account today that earns 3.5% compounded monthly so that it will accumulate to $10,000 in 8 years?

Answer 1

We know that if the compound rate per annum is r% ,the time in years is t and the principle is P, then the amount of money after t years is

3) In this case, P = $5500, r = 2.5 and t=7. Hence, his balance after 7 years would be

4) Let us assume that $P should be deposited in an account, so that at rate r% = 3.5% per annum after t=8 years, it would accumulate to $10000. Then, we get

Hence, $7594.12 should be deposited.