SOLUTION: Kimberly invested $7000 in her savings account for 4 years. When she withdrew it, she had $7705.31. Interest was compounded continuously. What was the interest rate on the account?

Question 269225: Kimberly invested $7000 in her savings account for 4 years. When she withdrew it, she had $7705.31. Interest was compounded continuously. What was the interest rate on the account?
Answer by dabanfield(803) (Show Source): You can put this solution on YOUR website!
Kimberly invested $7000 in her savings account for 4 years. When she withdrew it, she had $7705.31. Interest was compounded continuously. What was the interest rate on the account?
The formula for compound continuous interest is:
A = P*e^(rt)
In this case A = 7705.31, P = 7000, and t = 4 so:
7705.31 = 7000*e^(4r)
e^(4r) = 7705.31/7000
Taking the natural log of both sides above we get:
Ln (e^(4r)) = Ln (7705.31/7000)
Using the fact that Ln (e^a) = a the left side becomes:
4r = Ln(7705.31/7000)
r = [Ln(7705.31/7000)]/4
Use natural log tables and calculate r.
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