In 1 year, Leah wants to buy a bicycle that costs 500.00. If she opens a savings account that earns 6% interest compounded continuously, how much will she have to deposit as principal to have enough money in 1 year to buy the bike?

Solution

Solution

Principal : 470.88

Solution steps

Translate the problem into an equation:

500 = P e^{0.06 \cdot 1}

Solve for

P, 500 = P e^{0.06 \cdot 1} : P = 470.88

Principal : 470.88

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