You deposit $10,000 in a bank and plan to keep it there for five years. The bank pays 8% annual interest compounded continuously. Calculate the future value at the end of five years.
A) $15,000
B) $14,918
C) $14,500
D) $14,693

Question

Quizplus · Accepted Answer

The future value of an investment compounded continuously is calculated using the formula $A = Pe^{rt}$, where $P$ is the principal amount ($10,000), $r$ is the annual interest rate (0.08), $t$ is the time in years (5), and $e$ is the base of the natural logarithm (approximately 2.71828). Plugging in the values, we get $A = 10000 \times e^{0.08 \times 5} = 10000 \times e^{0.4} \approx \$14,918$.

You Deposit $10,000 in a Bank and Plan to Keep