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In 3 years, Caden wants to buy a bicycle that costs 500.00. If he opens a savings account that earns 15% interest compounded continuously, how much will he have to deposit as principal to have enough money in 3 years to buy the bike?

Solution

Solution

Principal : 318.81

Solution steps

Translate the problem into an equation:

500 = P e^{0.15 \cdot 3}

Solve for

P, 500 = P e^{0.15 \cdot 3} : P = 318.81

Principal : 318.81

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