David deposited $2,500 in a bank account, and it grew to $5,000 in 6 years. Calculate the annual interest rate, compounded continuously. Round your answer to the nearest two decimal places in percentage form. Use the formula A=Pert, where A is the balance (final amount), P is the principal (starting amount), e is the base of natural logarithms (≈2.71828), r is the interest rate expressed as a decimal, and t is the time in years.
Q. David deposited $2,500 in a bank account, and it grew to $5,000 in 6 years. Calculate the annual interest rate, compounded continuously. Round your answer to the nearest two decimal places in percentage form. Use the formula A=Pert, where A is the balance (final amount), P is the principal (starting amount), e is the base of natural logarithms (≈2.71828), r is the interest rate expressed as a decimal, and t is the time in years.
Identify values: Identify the values for P, A, and t. P = $2,500 A = $5,000 t = 6 \text{ years}
Use formula: Use the formula A=Pert. 5000=2500imese6r
Divide sides: Divide both sides by 2500. 2=e6r
Take ln: Take the natural logarithm (ln) of both sides. ln(2)=6r
Solve for r: Solve for r.r=6ln(2)
Calculate ln: Calculate ln(2). ln(2)≈0.693147
Divide by 6: Divide by 6. r≈60.693147r≈0.1155245
Convert to percentage: Convert r to a percentage. r≈0.1155245×100r≈11.55%
More problems from Continuously compounded interest: word problems