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David deposited $2,500\$2,500 in a bank account, and it grew to $5,000\$5,000 in 66 years. Calculate the annual interest rate, compounded continuously. Round your answer to the nearest two decimal places in percentage form. Use the formula A=PertA = Pe^{rt}, where AA is the balance (final amount), PP is the principal (starting amount), ee is the base of natural logarithms (2.71828\approx 2.71828), rr is the interest rate expressed as a decimal, and tt is the time in years.

Full solution

Q. David deposited $2,500\$2,500 in a bank account, and it grew to $5,000\$5,000 in 66 years. Calculate the annual interest rate, compounded continuously. Round your answer to the nearest two decimal places in percentage form. Use the formula A=PertA = Pe^{rt}, where AA is the balance (final amount), PP is the principal (starting amount), ee is the base of natural logarithms (2.71828\approx 2.71828), rr is the interest rate expressed as a decimal, and tt is the time in years.
  1. Identify values: Identify the values for PP, AA, and tt.
    P = $2,500\$2,500
    A = $5,000\$5,000
    t = 66 \text{ years}
  2. Use formula: Use the formula A=PertA = Pe^{rt}. 5000=2500imese6r5000 = 2500 imes e^{6r}
  3. Divide sides: Divide both sides by 25002500. 2=e6r2 = e^{6r}
  4. Take ln: Take the natural logarithm (ln\ln) of both sides. ln(2)=6r\ln(2) = 6r
  5. Solve for rr: Solve for rr.\newliner=ln(2)6r = \frac{\ln(2)}{6}
  6. Calculate ln\ln: Calculate ln(2)\ln(2). ln(2)0.693147\ln(2) \approx 0.693147
  7. Divide by 66: Divide by 66. r0.6931476r \approx \frac{0.693147}{6} r0.1155245r \approx 0.1155245
  8. Convert to percentage: Convert rr to a percentage. r0.1155245×100r \approx 0.1155245 \times 100 r11.55%r \approx 11.55\%

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