(Interest Rate Word Problems)
1. To solve an exponential or logarithmic word problems, convert the narrative to an equation and solve the equation.
Problem 5: If you invested $1,000 in an account paying an annual
percentage rate (quoted rate) of 12%, compounded continuously,
how much would you have in you account at the end of 1 year,
10 years, 20 years, 100 years?
Answer: 1 Year = $1,127.50, 10 years = $3,320.12, 20 years
= $11,023.18, 100 years $162,754,791.42
Solution and Explanations:
Use the formula
where A is the balance at the end of a certain time period, P is the beginning investment of $1,000, the annual interest rate is 12%, and t is the number of years.
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Author: Nancy Marcus