Problema Solution
find the interest rate needed for an investment of $4,000 to grow to an amount of $5,000 in 4 yr if interest is compounded continuously.
Answer provided by our tutors
P = $4,000
t = 4 years
A = $5,000
r = the rate as a decimal
A = P*e^(rt)
P*e^(rt) = A
4,000*e^(4r) = 5,000
e*(4r) = 5,000/4,000
4r = ln(5/4)
r = (1/4)ln(5/4)
r = 0.0558
r = 5.58%
The interest rate needed is 5.58%.