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Math Help - compounded continuously question

  1. #1
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    compounded continuously question

    Hi I'm trying to solve this compounded continuously question.

    A bank pays interest at a rate of 10.6%, compounded continuously. How much should be invested so as to have 11 thousand dollars in 6 years?

    Formula: Ae^rt

    So I have:

    11000e^(10.6)(6) =240809024.6

    Thats not correct huh.
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  2. #2
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    an increase of 10.6% gives a multiplying factor of 1.106 times more than what it was before use this instead
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  3. #3
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    so basically it's 11000e^(1.106)(6)

    I come up with the answer 199468.1834, but it's still incorrect
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  4. #4
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    unless im mistaken the question doesn't involve e and it is a compound interest question meaning that the formula is infact

    total amount= original amount*(multiplying factor^no. of yrs)
    therefore
    =11000*(1.106^6)
    =20133.69

    is that the correct answer?
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  5. #5
    is up to his old tricks again! Jhevon's Avatar
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    no. it says compounded CONTINUOUSLY. we indeed use the formula A(t) = A_0 e^{rt}

    the problem is, the original poster does not know what to plug in where. he/she plugged in 11000 for A_0 when, in fact, A_0 is what you should be solving for.

    you want to solve 11000 = A_0e^{0.106(6)} for A_0

    (as a decimal, 10.6% = 0.106)
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