Suppose you deposit $5000 at 8% interest compounded continuously. Find the average value of your account during the first 3 years.
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The word continuous indicates that we have to use: A=Pe^(rt)
A is the new amount
P is the principal investment (or initial amount)
r is the rate (in decimal form)
t is the time (in years)
When t=0
A = 5000e^(.09*0)
A= 5000
When t=2
A = 5000e^(.09*2)
A = 5986.09
To find the average, we add the values and divide by the number of years.
(5000 + 5986.09) / 2
5493.04
A is the new amount
P is the principal investment (or initial amount)
r is the rate (in decimal form)
t is the time (in years)
When t=0
A = 5000e^(.09*0)
A= 5000
When t=2
A = 5000e^(.09*2)
A = 5986.09
To find the average, we add the values and divide by the number of years.
(5000 + 5986.09) / 2
5493.04
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