A bank pays 2.5% interest on deposits. What is the return on a $1000 deposit after two years if interest is compounded continuously?
A) $1051.27
B) $778.80
C) $1648.72
D) $1284.03
E) none of these

Question

Quizplus · Accepted Answer

The formula for continuous compounding is A = Pe^(rt), where P is the principal, r is the rate, and t is the time. For a $1000 deposit at 2.5% interest for 2 years, A = 1000 * e^(0.025*2) = $1051.27.

A Bank Pays 2