Problem

Find the compound amount and the amount of interest earned by the deposit below.
$\$ 4,000$ at $4.36 \%$ compounded continuously for 2 years.
What is the compound amount?

Answer

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Answer

\(\boxed{The compound amount is \$4364.46}\)

Steps

Step 1 :We are given a principal amount (P) of $4000, an annual interest rate (r) of 4.36%, and a time period (t) of 2 years. The interest is compounded continuously.

Step 2 :We can calculate the compound amount using the formula for continuous compounding: \(A = P * e^{rt}\), where A is the amount of money accumulated after n years, including interest.

Step 3 :First, we convert the annual interest rate from a percentage to a decimal by dividing by 100. So, \(r = \frac{4.36}{100} = 0.0436\).

Step 4 :Next, we substitute the values of P, r, and t into the formula: \(A = 4000 * e^{0.0436 * 2}\).

Step 5 :Calculating the above expression, we find that the compound amount A is approximately $4364.46.

Step 6 :\(\boxed{The compound amount is \$4364.46}\)

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