SOLUTION: To save for a new car, Trafton invested $3,000 in a savings account that earns 6.5% interest, compounded continuously. After four years, he wants to buy a used car for $4,000. How
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-> SOLUTION: To save for a new car, Trafton invested $3,000 in a savings account that earns 6.5% interest, compounded continuously. After four years, he wants to buy a used car for $4,000. How
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Question 1153441: To save for a new car, Trafton invested $3,000 in a savings account that earns 6.5% interest, compounded continuously. After four years, he wants to buy a used car for $4,000. How much money will he need to pay in addition to what is in his savings account? (Round your answer to the nearest cent.) Answer by Theo(13342) (Show Source):
You can put this solution on YOUR website! continuous compound formula is f = p * e ^ (r * t)
f is the future value
p is the present value
e is the scientific constant of 2.718281828.....
r is the interest rate per time period (years in this case)
t is the number of time periods (years in this case)>
in your problem, the formula becomes:
f = 3000 * e ^ (.065 * 4) = 3890.79026 rounded to nearest cent = 3890.79
that's what will be in the account in 4 years.
since the cost of the car is 4000, he will have to pay an additional 4000 - 3890.79 = 109.21.
