You deposit $2,500 in a security that compounds money in a continuous manner. The annual rate of compounding is 3.1%. If you remain invested for two and half years, how much will you receive at the end (including your initial investments)?
The correct answer is $2701.46
I want to know how to get the answer.
We use the formula:
A=P(e)^(r*n)
Where
A=future value
P=present value
R=rate of interest
N=time period
e=2.71828
Hence
A=2500*(2.71828)^(0.031*2.5)
=$2500*1.080582176
Which is equal to
=$2701.46(approx).
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