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In 1 year, Harold wants to buy a bicycle that costs 600.00. If he opens a savings account that earns 9% interest compounded continuously, how much will he have to deposit as principal to have enough money in 1 year to buy the bike?

Solution

Solution

Principal : 548.36

Solution steps

Translate the problem into an equation:

600 = P e^{0.09 \cdot 1}

Solve for

P, 600 = P e^{0.09 \cdot 1} : P = 548.36

Principal : 548.36

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