Question

Cindy will require $11,000 in 4 years to return to college to get an mba degree. how much money should she ask her parents for now so that, if she invests it at 10% compounded continuously, she will have enough for school

Answer 1

In this problem we need to find the principal (P), A=11000, r=.09, t=2
:
P * e^(.09*2) = 11000
P * e^.18 = 11000
P = 
on a good calc enter:
11000/(e^.18) = 9187.97 ~ $9188 required
:
Check solution on a calc: enter 9188 * e^.18 = 11000.03Yes, convert 9% to .09
:
The continuous interest equation: P * e^(r*t) = A
Where A is the resulting amt; P = principal; r = interest rate; t = time in yrs