Solve the problem.
-The purchasing power of a dollar is decreasing at the rate of 6.0% annually, compounded continuously. How long will it take for the purchasing power of $1.00 to be worth $0.81? Round answers to the nearest hundredth.
A) 13.50 yr
B) 0.04 yr
C) 0.35 yr
D) 3.51 yr

Question

Quizplus · Accepted Answer

The formula for continuous compounding is $ A = Pe^{rt} $. Here, $ A = 0.81 $, $ P = 1 $, and $ r = -0.06 $. Solving for $ t $ gives $ t = \frac{\ln(0.81)}{-0.06} \approx 3.51 $ years.

Solve the Problem. -The Purchasing Power of a Dollar Is Decreasing at the Decreasing