Question

A bank account earned 3.5% continuously compounded annual interest. After the initial deposit, no deposits or withdrawals were made. At the end of an 8 year period, the balance in the account was $13231.30.

Answer 1

This question is incomplete. Below is the complete question:

A bank account earned 3.5% continuously compounded annual interest. After the initial deposit, no deposits or withdrawals were made. At the end of an 8 year period, the balance in the account was $13231.30. what is the amount of the initial deposit?

Answer: The initial deposit is $10,001

Step-by-step explanation:

To solve this we need to utilize the continuous compounding interest formula:-

Fv = Pv × e^(i × t)

Where, Fv = the future value

Pv = present value

i = the interest rate

t = the time in years

e = a mathematical constant that is usually approximated by 2.7183

In this case, the Fv = 13,231.30

i = 3.5% or 0.035

t = 8 years

e = 2.7183

Pv = ? (The unknown variable).

13,231.30 = Pv × [2.7183^(0.035 × 8)]

13,231.30 = Pv × [2.7183^(0.28)]

13,231.30 = Pv × 1.323

Pv = 13,231.30/1.323

Pv = $10000.98

= $10,001

Therefore the initial deposit is $10,001