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Adam invests $6,139 in a retirement account with a fixed annual interest rate compounded continuously. After 17 years, the balance reaches $8,624.97. What is the interest rate of the account

Answer :

LammettHash

An account with a starting balance of P accruing interest with rate r for time t, componunded continuously, ends up with a balance A according to

[tex]A=Pe^{rt}[/tex]

Plug in everything you know and solve for r :

[tex]8624.97=6139e^{17r}[/tex]

Divide both sides by 6139:

[tex]\dfrac{8624.97}{6139}=e^{17r}[/tex]

Take the natural logarithm of both sides:

[tex]\ln\left(\dfrac{8624.97}{6139}\right)=\ln e^{17r}[/tex]

Recall that [tex]\ln x^y=y=\ln x[/tex], so that

[tex]\ln\left(\dfrac{8624.97}{6139}\right)=17r\ln e[/tex]

and ln(e) = 1, so

[tex]\ln\left(\dfrac{8624.97}{6139}\right)=17r[/tex]

Finally, divide both sides by 17:

[tex]r=\dfrac1{17}\ln\left(\dfrac{8624.97}{6139}\right)=\boxed{0.02}[/tex]

So the account has an interest rate of 2%.

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