You need a down payment of $17,200 in order to purchase your first home 4 years from today.You currently have $14,014 to invest.In order to achieve your goal,what nominal interest rate,compounded continuously,must you earn on this investment? Do not round your intermediate calculations.
A) 5.48%
B) 5.12%
C) 3.84%
D) 4.46%
E) 6.20%

Question

Quizplus · Accepted Answer

We can use the formula for continuous compound interest: A = Pe^(rt), where A is the future value, P is the present value, e is the constant e (2.71828), r is the interest rate, and t is the time in years. We know P = $14,014, A = $17,200, and t = 4. Solving for r, we get r = ln(A/P)/(t) = ln(17200/14014)/4 = 0.0512 or 5.12% (rounded to the nearest hundredth). Therefore, the nominal interest rate, compounded continuously, that you need to earn on your investment is 5.12%.

You Need a Down Payment of $17,200 in Order to Purchase