Recall that the compound interest formula for continuous compounding is A(P, r,

Question

Recall that the compound interest formula for continuous compounding is A(P, r, t) = Pert where A is the future value of an investment of P dollars after t years at an interest rate of r. Calculate and , all evaluated at (120, 0.3, 8). (Round your answers to two decimal places.). Interpret your answers. For a $ investment at % interest invested for years and compounded continuously, the accumulated amount is increasing at a rate of $ per $1 of principal, at a rate of $ per increase of 1 in r, and at a rate of $ per year. What does the function of t tell about your investment? Ap(120, 0.3, t) tells you the rate at which the accumulated amount in an account bearing % interest, compounded continuously, with a principal of $ , is growing per $1 in the , years after the investment.

Explanation / Answer

a) $120 0.3 8 $11.02 $10582.25 $396.83 b) 0.3 $120 t

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