Problem

Aunt Hildie invests $\$ 12,000$ into a fund that guarantees a $5.5 \%$ rate of return compounded continuously. She plans to withdraw the money in three years. What will the total amount in the account be in three years?

Since this is in dollars, it makes sense to report your answer accurate to two digits. Do not use a "\$" or comma when reporting your answer.

Answer

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Answer

Rounding to two decimal places, the total amount in the account in three years will be \(\boxed{14152.72}\)

Steps

Step 1 :The problem is asking for the future value of an investment given an initial amount, a rate of return, and a time period. The formula for continuous compounding is: \(A = P * e^{rt}\) where: A is the amount of money accumulated after n years, including interest. P is the principal amount (the initial amount of money). r is the annual interest rate (in decimal). t is the time the money is invested for, in years.

Step 2 :In this case, P = $12,000, r = 5.5% = 0.055, and t = 3 years. We can substitute these values into the formula to find A.

Step 3 :Substituting the given values into the formula, we get \(A = 12000 * e^{(0.055*3)}\)

Step 4 :Solving the above expression, we get A = 14152.717424536688

Step 5 :Rounding to two decimal places, the total amount in the account in three years will be \(\boxed{14152.72}\)

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