Solve the problem. When needed, use 365 days per year and 30 days per month.
-What principal invested at 8% compounded continuously for 4 years will yield $1190? Round the answer to two decimal places.
A) $864.12
B) $1188.62
C) $627.48
D) $1638.78

Question

Quizplus · Accepted Answer

The formula for continuous compounding is $A = Pe^{rt}$, 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 (decimal), and $t$ is the time the money is invested for in years. Rearranging the formula to solve for $P$, we get $P = \frac{A}{e^{rt}}$. Given $A = 1190$, $r = 0.08$, and $t = 4$, we find $P = \frac{1190}{e^{0.08 \times 4}}$, which calculates to approximately $864.12.

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