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3 March, 13:04

To save for a new car, Trafton invested $7,000 in a savings account that earns 5.5% interest, compounded continuously. After four years, he wants to buy a used car for $9,000. How much money will he need to pay in addition to what is in his savings account? (Round your answer to the nearest cent.)

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  1. 3 March, 14:30
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    Answer: he needs to add $277.5

    Step-by-step explanation:

    The formula for continuously compounded interest is

    A = P x e (r x t)

    Where

    A represents the future value of the investment after t years.

    P represents the present value or initial amount invested

    r represents the interest rate

    t represents the time in years for which the investment was made.

    From the information given,

    P = $7,000

    r = 5.5% = 5.5/100 = 0.055

    t = 4 years

    Therefore,

    A = 7000 x e (0.055 x 4)

    A = 7000 x e (0.22)

    A = $8722.5

    After four years, he wants to buy a used car for $9,000. Therefore, the additional amount that he needs to add is

    9000 - 8722.5 = $277.5
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