Steven wants to make some extra money using a CD account. He wants $22,000 in his account after 5 yearscompounded continuously. How much principal will he have to start with, at an interest rate of 6.625%?

Answer: You got to multiply 22,000 times 5 and that will equal 110,000

Step-by-step explanation:

Final answer:

To have a final balance of $22,000 in a CD account after 5 years with continuous compounding at an interest rate of 6.625%, Steven needs to initially deposit approximately $15,895.68.

Explanation:

To calculate how much principal Steven should start with in his CD account, we need to use the formula for continuous compounding, which is A = Pe^(rt), where:

• A is the amount of money accumulated after n years, including interest.
• P is the principal amount (the initial amount of money).
• e is the base of the natural logarithm, approximately equal to 2.71828.
• r is the annual interest rate (decimal).
• t is the time the money is invested for in years.

In Steven's case, he wants A = $22,000 after t = 5 years, at an interest rate r of 6.625% or 0.06625 in decimal format. Substituting these values into our formula and solving for P, we get:

P = A / e^(rt)

P = 22000 / e^(0.06625 * 5)

After calculating this expression, we find that Steven needs to deposit approximately $15,895.68 into his CD account to have $22,000 after 5 years with continuousinterest compounding at 6.625%.

Learn more about Continuous Compounding here:

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