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In 1 year, Patrick wants to buy a bicycle that costs 700.00. 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 1 year to buy the bike?

Solution

Solution

Principal : 602.5

Solution steps

Translate the problem into an equation:

700 = P e^{0.15 \cdot 1}

Solve for

P, 700 = P e^{0.15 \cdot 1} : P = 602.5

Principal : 602.5

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