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In 1 year, Debbie wants to buy a bicycle that costs 2,000.00. If she opens a savings account that earns 12% interest compounded continuously, how much will she have to deposit as principal to have enough money in 1 year to buy the bike?

Solution

In 1 year, Debbie wants to buy a bicycle that costs 2, 000.00. If she opens a savings account that earns 12% interest compounded continuously, how much will she have to deposit as principal to have enough money in 1 year to buy the bike?

Solution

Principal : 1773.84

Solution steps

Translate the problem into an equation:

2000 = P e^{0.12 \cdot 1}

Solve for

P, 2000 = P e^{0.12 \cdot 1} : P = 1773.84

Principal : 1773.84

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