Problem

How much should be invested now at an interest rate of $6.5 \%$ per year, compounded continuously, to have $\$ 3500$ in two years?
Do not round any intermediate computations, and round your answer to the nearest cent.

Answer

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Answer

Rounding to the nearest cent, the final answer is \(\boxed{3073.33}\)

Steps

Step 1 :The problem is asking for the present value of an investment that will grow to $3500 in two years with a continuous compounding interest rate of 6.5%.

Step 2 :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), and \(t\) is the time the money is invested for in years.

Step 3 :We can rearrange the formula to solve for \(P\): \(P = A / e^{rt}\)

Step 4 :We know that \(A = 3500\), \(r = 6.5\% = 0.065\), and \(t = 2\). We can substitute these values into the formula to find \(P\).

Step 5 :Substituting the values we get: \(P = 3500 / e^{(0.065*2)}\)

Step 6 :Solving the above expression we get \(P = 3073.3340082219647\)

Step 7 :Rounding to the nearest cent, the final answer is \(\boxed{3073.33}\)

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